Moody's agency downgrades France's rating – Libération

It's starting well. A few hours after his appointment to Matignon, François Bayrou saw France's rating downgraded by the Moody's agency. It was not a Friday evening when we were expecting an opinion from an agency on the French debt, but the Moody's agency decided on November 13, nine days after the fall of the Barnier government, to review the rating of the France.

France is now rated Aa3: this is the lowest rating in the rating category “high or good”. The agency argues that “the country’s public finances will be substantially weakened in the years to come” due to the “political fragmentation” who risks “to hinder fiscal consolidation”. She also cites the vote on the motion of censure, and considers that there is a “very low probability that the next government will sustainably reduce the scale of budget deficits beyond next year”.

Moral problem

The resigning Minister of Economy and Finance, Antoine Armand, “taken note”and considered that “the appointment of Prime Minister François Bayrou and the reaffirmed desire to reduce the deficit provide an explicit response.” Such a sanction echoes the arguments of the new Prime Minister, obsessive about debt. He also hammered it home again in his handover speech on Friday on the steps of Matignon, alongside Michel Barnier: “The deficit and debt pose a moral problem.” And to announce: “My course of action will be to hide nothing, to neglect nothing.”

On October 25, the same agency issued a warning by placing France under “negative perspective”, like his colleague Fitch. Moody's thus warned that it planned to lower the French rating within six months, a way of showing its doubts about the capacity of the government – ​​of Michel Barnier, at the time – to reduce the deficit to 6.1% of GDP this year to 5% in 2025 and to reduce a debt of 110% of GDP, via a drastic budget, in which the government showed 60 billion in savings and tax increases.

It is the first of the major rating agencies to lower the French rating by a notch. since the dissolution. In mid-October, its counterparts Fitch and Standard & Poor's settled for more moderate sanctions; the first maintained the French rating with a negative outlook, the second maintained it with a stable outlook – to the great relief of Bercy. Who could hope to slip through the drops of agency ratings? Better yet, not only has the “spread” – difference in ten-year borrowing rates with Germany – been slightly reduced, but France has easily managed to issue 4.5 billion euros of bonds, at a low interest rate, with demand three times greater than supply. And the ECB's recent rate cut has further eased the pressure on French rates.

“Political impasse”

Except that since October 25, the date of Moody's warning, France has plunged into political crisis with the censorship of the Barnier government, which blocked the budgetary debate. It is this failure that the American agency wanted to sanction. The day after the censorship, Moody's raised its voice. This censorship is “negative for credit” car “it aggravates the country's political impasse, reduces the likelihood of consolidation of public finances, and contributes to a greater risk premium as well as a higher cost of debt”according to the agency. S&P also judged that “the rejection of the government by Parliament complicates the budgetary perspective”.

For the first time since 1979, France will pass the deadline provided for in the Constitution of December 31, 2024 without a budget for next year. The Barnier government fell on Wednesday December 4 after the adoption of a motion of censure following the triggering of 49.3 on the social security financing bill for 2025. Emmanuel Macron announced the next day the use of the special law , emergency procedure, to allow the continuity of public services in the absence of a budget. François Bayrou's priority will be to pass new budgets as quickly as possible at the start of the year. A difficult mission as the positions of deputies on budgetary choices seem irreconcilable.