France’s credit-rating outlook cut to negative by Moody’s

Ratings agency Moody’s downgraded the outlook on France’s credit rating to negative on Friday due to concerns over the country’s debt and deficit.

Moody’s cited the “increasing risk that France’s government will be unable to implement measures that would prevent sustained wider-than-expected budget deficits and a deterioration in debt affordability.”

The decision comes as French Prime Minister Michel Barnier appears headed for a major clash with President Emmanuel Macron over the country’s public finances. Macron has declined to publicly endorse Barnier’s efforts to rein in the deficit through tax hikes and spending cuts. 

The ratings agency affirmed France’s credit rating at Aa2, noting that this was supported by its “large, wealthy and diversified economy.” But it lowered the country’s outlook to negative from stable.

“The fiscal deterioration that we have already seen is beyond our expectations and stands in contrast with governments in similarly rated countries that are tending to consolidate their public finances in the current environment,” Moody’s said.

“The risks to France’s credit profile are heightened by a political and institutional environment that is not conducive to coalescing on policy measures that will deliver sustained improvements in the budget balance,” it said.

French Economy Minister Antoine Armand said he “took note” of Moody’s decision. “Yes, France has real economic strengths. It is also capable of carrying out far-reaching reforms,” some of which “have already produced convincing results,” the minister said in a statement.

“It is with the same energy that the government will act to put our public finances back on an even keel,” Armand said.