Moody's cuts France's credit outlook to negative, citing risks from political fragmentation

[French flag with Eiffel Tower in the background]
querbeet

Moody's has recently cut France's credit outlook to negative while maintaining its long-term foreign-currency sovereign credit rating at Aa3.

The revision to a negative outlook reflects Moody's concerns over increased risks from political fragmentation in France, which may hinder the government’s ability to address and reduce its budget deficit effectively.

Finance Minister Roland Lescure said in a statement that Moody's decision "reflects the absolute necessity of building a collective path toward a budgetary compromise." "The government remains determined to meet the target of a 5.4% of GDP deficit in 2025 and to continue on an ambitious trajectory of reducing the public deficit to return below 3% of GDP by 2029, while preserving growth," he added.

Moody's cited "increased risks from political fragmentation" impacting France's budgetary trajectory and deficit reduction plans.

This follows a series of downgrades and outlook changes on France by other agencies like Fitch, DBRS, and S&P Global within just over a month.

The CAC 40, the benchmark French stock market index closed flat at 8,226 on Friday, leaving the index modestly higher for the week after reaching fresh record highs earlier in the week amid rising political tensions and slowing private-sector activity.

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