The previous rating was placed on a negative outlook only at the end of October, and Moody’s announced on the same day of the censorship of Michel Barnier’s government, December 4, that this event could only be “negative” for the rating. credit of France.
Bercy nevertheless seemed not to expect such rapid new action, of which the Minister of Economy and Finance Antoine Armand immediately “took note”.
For Moody’s, France’s public finances will be “considerably weaker” in the next three years than it previously forecast, due to “political fragmentation more likely to prevent significant fiscal consolidation.”
She judges the probability “low” of seeing the next government “sustainably reduce the extent of the budget deficit beyond next year”.
François Bayrou Prime Minister, or the triumph of the average politician
“Whole decades”
While the Barnier government was banking on a public deficit of 6.1% of GDP this year, and had constructed its budgetary texts on the basis of a public deficit of 5% in 2025, to return below the limit of 3% tolerated by Brussels in 2029, Moody’s doesn’t believe it.
The rating agency anticipates a public deficit stagnating at 6.3% of GDP in 2025, and still at 5.2% in 2027. Thus, instead of reducing, the public debt would increase from 113.3% of GDP in 2024 to around 120% in 2027.
“If debt capacity has long been a relative asset of France in terms of credit, this asset is eroding compared to its peers benefiting from a similar rating,” observes Moody’s.
Antoine Armand estimated in his press release that the appointment of François Bayrou provided “an explicit response” to the concerns of the rating agency.
Michel Barnier and François Bayrou indeed showed great attention to these questions during their very courteous handover of power on Friday afternoon.
Mr. Barnier wanted to leave a solemn message: “We would be wrong to forget the deficit and the debt (…) otherwise they will be brutally reminded of all of us.”
“No one knows the difficulty of the situation more than me,” replied Mr. Bayrou, recalling having “taken inconsiderate risks in (his) political life to pose (during elections, including presidential elections, in which he was running ) the question of debt and deficits”.
“And everyone said ‘he’s completely crazy, we’re not doing a campaign on debt’,” he recalled, smiling.
Judging that this is both a financial and “moral” problem, with the weight that the debt places on children, the new tenant of Matignon promised that in the face of this situation “inherited from entire decades” , his “guideline” would be “to hide nothing, to neglect nothing and to leave nothing aside”.
