After the fall of the government
Moody’s agency downgrades France’s credit rating
Not an easy start for France’s new Prime Minister Bayrou. One of the major rating agencies downgrades France’s credit rating. She looks at the complicated political situation.
The rating agency Moody’s has downgraded France’s credit rating. As the agency announced, the rating was lowered from Aa2 to Aa3. The decision reflects the agency’s view that public finances in France will be significantly weakened in the coming years. Taking on debt could now become more expensive for France. However, Moody’s has changed the outlook for Europe’s second largest economy from “negative” to “stable”.
The move came immediately after head of state Emmanuel Macron appointed centrist politician François Bayrou as the new French prime minister. A week ago, the right-wing nationalists and the left-wing camp in the French National Assembly overthrew the previous center-right government of Michel Barnier with a vote of no confidence in the dispute over the planned austerity budget. Even then, Moody’s judged: “This event is bad for creditworthiness.”
France still has no budget for the coming year, even if a special law is intended to serve as a transition. The country must get its high debts and new borrowings under control. The country expects a budget deficit of 6.1 percent this year. Because of the excessive new debt, the EU Commission is running deficit proceedings against France.
Moody’s attested that the country has “political fragmentation” that could prevent a significant budget strengthening. None of the political camps in France has an absolute majority in the National Assembly. Coalitions are rather unusual in the country. The country is politically divided into three large blocs: Macron’s center forces, the left-wing camp and Marine Le Pen’s right-wing nationalists. “There is now a very low probability that the next administration will meaningfully reduce the budget deficit beyond next year,” Moody’s said.
dpa
Source: Stern
