On Friday, Moody’s downgraded France’s credit rating from Aa2 to Aa3, citing expectations of weakening finances and increasing political fragmentation that could hinder fiscal consolidation. The downgrade also reflects moderate risks, partly due to the ongoing war in Ukraine. However, France’s outlook was upgraded from negative to stable.
Moody’s stated that it is doubtful France’s next government will sustainably reduce fiscal deficits beyond 2025. The company now forecasts a significant deterioration in France’s public finances over the next three years compared to its October 2024 baseline.
This is not the first time the credit rating company has cut France’s sovereign rating. In 2012, it was reduced from Aaa, the prime level, to Aa1, the highest of the high-grade levels. The rating was downgraded again in 2015 to Aa2. Finally, as of last Friday, France’s credit rating is now at Aa3, the bottom-end of high grade, just before the upper medium grade.
