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Moody’s downgraded France’s outlook from “stable” to “negative” due to concerns about the country’s ability to rein in its widening budget deficits. Prime Minister Michel Barnier is under pressure to implement measures to address the escalating fiscal deficit caused by excessive spending surpassing tax revenues.
In response, Barnier unveiled France’s 2025 budget proposal, which includes 60 billion euros in spending cuts and tax increases, predominantly targeting large corporations. The government aims to reduce the current budget deficit of 6.1% of GDP to 5% next year, relying on a projected economic growth of 1.1% for both this year and the next.
Moody’s expressed surprise at the extent of France’s fiscal deterioration, noting its divergence from similarly rated countries. Despite maintaining France’s credit rating at “Aa2,” the agency highlighted concerns regarding the country’s debt affordability compared to its peers and the potential challenges posed by the turbulent political environment in achieving sustained deficit reduction.
Following suit, Fitch also revised France’s outlook to “negative” from “stable” in October, citing fears of expanding deficits and a complex political landscape hindering efforts to strengthen the country’s finances.
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Emma Collins, graduated in Financial Economics from the University of Chicago in the USA in 2016. She has since worked at an asset management firm in New York, where she specializes in investment strategies and portfolio management. Emma has a keen interest in financial analysis and has published several articles in renowned financial journals. Her work focuses on providing actionable insights to investors, and she is known for her forward-thinking approach to managing financial portfolios.