Paris: Credit ratings agency Moody’s has revised France’s outlook to “negative” from “stable” as of Friday, citing increasing uncertainty regarding the country’s ability to manage its widening budget deficits. However, Moody’s maintained its rating on French debt at Aa2, a decision seen as a relief for policymakers who had braced for a potential downgrade.
The revision underscores growing international concerns about France’s public finances, coinciding with discussions in parliament regarding a stringent budget bill for 2025. French Finance Minister Antoine Armand responded to the decision by stating that the government is committed to restoring its public finances. During a press conference at the International Monetary Fund and World Bank annual meetings in Washington, he emphasized that the top fiscal priority is to reduce the public deficit from the current 6.1% of GDP to 5% by 2025.
“We noted the prospect of the negative outlook. We didn’t wait for the negative outlook to take the necessary measures,” he affirmed, underscoring the government’s proactive stance on controlling debt.
Increasing fiscal deficits, driven by expenditures surpassing tax revenues, have intensified pressure on Prime Minister Michel Barnier to implement effective measures. Earlier this month, Barnier unveiled France’s 2025 budget, which includes €60 billion in spending cuts and tax increases, primarily targeting large corporations.
Moody’s remarked, “The fiscal deterioration that we have already seen is beyond our expectations and stands in contrast with governments in similarly rated countries.” The agency also raised concerns regarding the country’s declining debt affordability compared to its peers and noted that the current turbulent political climate poses risks to institutions’ ability to achieve sustained deficit reductions.
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Despite these challenges, Moody’s decision to retain the Aa2 rating reflects France’s large and diversified economy. The agency acknowledged that the country’s public institutions are competent and that previous governments have demonstrated a willingness to implement economic reforms.
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Adding to the concerns, Fitch Ratings also downgraded France’s outlook to “negative” from “stable” in mid-October, citing fears of expanding deficits and a complex political landscape that hampers the government’s financial recovery efforts.
