MercoPress. South Atlantic News Agency

Moody's downgrades politically shaken France's credit rating

The Chairman of the centrist Democratic Movement (MoDem) became Macron's fourth prime minister this year

A politically shaken France has been downgraded by Moody's Investors Service from “Aa2” to “Aa3” and the country's long-term outlook went from “stable” to “negative” amid the ongoing “fragmentation” following the appointment of Prime Minister François Bayrou.

“The decision to downgrade France to Aa3 reflects our view that France's public finances will be significantly weakened by the country's political fragmentation, which will limit the scope and scale of measures that can reduce the ballooning deficit for the foreseeable future,” a statement from Moody's read.

Bayrou took office after a vote of no confidence against his predecessor earlier this month. In this scenario, the 73-year-old Bayrou insisted that the budget deficit problem remained the government's priority. “Looking ahead, there is a very low probability that the next government will sustainably reduce the fiscal deficit beyond next year [2025],” Moody's noted.

In 2025, the deficit will rise to 6.3% of GDP and fall to 5.2% in 2027, it forecasts. At the same time, the rating agency expects France's debt to rise from 113.3% of GDP in 2024 to 120% of GDP by 2027.

French President Emmanuel Macron appointed Bayrou last Friday with the challenge of rallying a parliamentary majority to prevent his downfall and a further worsening of the political crisis.

“No one knows better than me the difficulty of the situation” political and budgetary of France, Bayrou said upon accepting his nomination to become Macron's fourth prime minister in 2024 after the 73-year-old conservative Michel Barnier fell on Dec. 4 when trying to pass the 2025 budget. He had been just three months in office.

Despite the political turmoil, French lawmakers voted en masse against the European Union-Mercosur Free Trade Agreement signed earlier this month in Montevideo.