Moody’s keeps France’s Aa3 rating with a negative outlook
The agency cites France’s economic strength but warns that political divisions could obstruct deficit cuts as the government seeks approval for its 2027 budget.
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The agency cites France’s economic strength but warns that political divisions could obstruct deficit cuts as the government seeks approval for its 2027 budget.
Moody’s retained France’s Aa3 sovereign credit rating with a negative outlook in an announcement late Friday. The rating assesses the national government’s ability to repay its debt. It remains unchanged, while the outlook signals a risk of a future downgrade.
The review comes as France’s proposed 2027 budget remains stalled by political divisions. Fortune put public debt at about $4 trillion, or 119% of gross domestic product (GDP), the value of goods and services the economy produces.
Analysis
Moody’s identified France’s wealthy economy and competent public institutions as strengths. Its concern is that a divided parliament and social tensions could hamper the government’s response to high deficits, rising debt and higher borrowing costs. The agency warned that these obstacles could weaken France’s finances faster than it currently expects.
The proposed budget would narrow the deficit—the gap between annual government spending and revenue—but Moody’s expects a smaller reduction than the government proposes. It forecasts weaker economic growth than the government does and sees political difficulties in carrying out spending cuts.
| Measure | Share of GDP |
|---|---|
| Starting deficit cited in the budget proposal | 5.4% |
Backed by the right and centre after the October 17 violence, the proposal would widen who can be made to pay and which benefits can be seized. It now goes to the National Assembly.
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| 5.0% |
| Moody’s deficit forecast for 2027 | 5.2% |
Moody’s expects debt to reach 122% of GDP in 2027 and continue rising through the rest of the decade. It says stabilising the debt burden will require a significant, sustained effort beyond the presidential election next spring. Its forecast assumes that social tensions, political fragmentation and muted growth will prevent rapid deficit reduction.
France’s debt has an average maturity of about 8.5 years—the average time until repayment is due—Moody’s noted. That limits how quickly higher borrowing costs affect the overall debt bill: the increase would need to persist for an extended period to materially worsen France’s ability to afford its debt payments.
The next unresolved decision is adoption of the 2027 budget. Moody’s expects it eventually to pass, possibly by decree, but warns that recent unrest could constrain efforts to reduce the deficit.
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