Rating agency Moody's lowered France's credit rating, highlighting the impacts of the political crisis and the worrying outlook for public finances. François Bayrou, newly appointed Prime Minister, inherits a tense economic and budgetary situation.
Immediate downgrade of France's rating
Barely hours after the appointment of François Bayrou to Matignon last Friday, Moody's downgraded France's sovereign rating, going from Aa2 to Aa3. This decision, which comes after months of political turbulence, reflects according to the agency ” political fragmentation » making rapid budgetary consolidation unlikely. Moody's, which until then had been more optimistic than its competitors S&P and Fitch, is now aligning itself with their assessments.
Since the dissolution of the National Assembly last June by Emmanuel Macron, political uncertainty has increased, weakening investor confidence. The censorship of Michel Barnier's government at the beginning of December only worsened the situation, accelerating a negative revision of the rating at the end of October.
The Ministry of the Economy, headed by Antoine Armand, said it had “taken note” of this decision, while recognizing its potential effect on the markets. Moody's now anticipates public finances ” considerably weaker » for the next three years, with a public deficit which should stagnate at 6.3% of GDP in 2025 and remain high at 5.2% in 2027.
Public debt and political uncertainties
The objective stated by the previous government of reducing the public deficit below 3% of GDP by 2029 now seems out of reach. According to Moody's, public debt, already estimated at 113.3% of GDP in 2024, could reach almost 120% by 2027. « If debt capacity was an asset for France, this advantage is eroding compared to its peers “, warned the agency.
This situation places François Bayrou facing a major challenge. During the transfer of power with Michel Barnier, the former Prime Minister recalled the urgency of not underestimating the weight of the debt, described as “ moral problem » by his successor. Bayrou promised to adopt a transparent and comprehensive approach to this “situation inherited from entire decades”, while recognizing the complexity of redressing the situation in a tense political context.
With a record debt and parliamentary fragmentation which is hampering any ambitious reform, France's budgetary future looks uncertain. Moody's stresses that the new government's ability to act will be crucial to reversing the trend, but it judges the likelihood ” weak “. François Bayrou, who made the fight against debt a priority in his speech, will have to convince, internally and on the international scene.
