Moody's Reviews France Credit Rating Amid Political Paralysis
Moody's is reviewing France's credit rating as political instability and violent social unrest drive government bond yields to a 15-year high.
The credit rating agency Moody's is conducting a review of France's Aa3 rating on October 23, following previous downgrades by Standard & Poor's and Fitch. The review comes as France struggles with political paralysis resulting from a hung parliament after the 2024 snap election and escalating social unrest.
Violent protests over the cost of living and school funding have evolved into riots and looting, hindering government efforts to implement budget cuts. France currently maintains one of the largest deficits in the euro zone. This instability has pushed the risk premium on French government debt relative to German bonds to a 15-year high, with the benchmark 10-year bond yield reaching 5.14%, the highest level since 2002.
Investors remain concerned about the budget deficit and the potential for a far-right victory in the upcoming presidential elections scheduled for April 18 and May 2, 2027. Moody's indicated that the government's ability to overcome fragmentation in parliament will be the key factor for the next rating move.
