Moody's Maintains France's Credit Rating Amid Political Gridlock and Protests

Key summary

Moody's Investors Service has kept France's credit rating at Aa3 with a negative outlook, unchanged since October of the previous year. The agency cited ongoing political instability in a hung parliament, widespread cost-of-living protests, and fiscal challenges as key factors. While Moody's noted that the government's proposed 2027 budget plan supports public finance recovery, it warned that parliamentary fragmentation and social tensions remain significant hurdles to passing necessary spending cuts. Market data shows France's 10-year bond yield reached 5.14%, its highest since July 2005, while the spread against German bonds hit a 15-year high on Thursday. The rating assumes approval of deficit-reduction measures by 2027 and a reduction in financial costs and social tensions within the coming months. Upcoming presidential elections scheduled for April 18 and May 2 next year could further impact credit conditions, with polls suggesting a potential victory for right-wing parties.