Moody's revises France's outlook to negative, retains Aa3 rating

The agency cautioned that sustained political instability may obstruct governance and risk undoing key structural reforms such as the 2023 pension overhaul, potentially lowering economic growth by reducing labour supply.

Despite these challenges, Moody’s maintained France’s Aa3 rating, citing its diversified, wealthy economy, strong household and corporate balance sheets, and resilient banking sector. It, however, warned of weakening debt affordability as older, low-interest debt matures and refinancing costs climb.

Moody’s also affirmed the Aa3 backed ratings on the Societe de Prise de Participation de l’Etat (SPPE) and its short-term issuer ratings at P-1, adjusting its outlook to negative. SPPE’s guaranteed debt remains fully backed by the French government, though no guaranteed debt is currently outstanding.

Moody’s kept France’s local- and foreign-currency ceilings at Aaa, reflecting the euro area’s strong institutional, legal, and regulatory framework. The rating agency noted that the minimal risk of a euro exit and access to shared liquidity and crisis-management mechanisms support the country’s ceilings, which remain three notches above its Aa3 sovereign rating.

ALCHEMPro News Desk (SG)