Moody’s warned Statement yesterday evening, Monday – One of the negative repercussions of holding early parliamentary elections on France’s credit rating.
Moody’s said that “these early elections reinforce risks to fiscal consolidation” and described it as “credit negative” for the country’s current rating of Aa2, which is one notch higher than its rating at Aa2. Fitch and Standard & Poor’s Global.
The statement explained that “potential political instability represents a credit risk given the difficult financial conditions that the next government will inherit.”
He added that the current “stable” outlook for the French economy could be reduced to “negative” if its debt indicators worsen.
French President Emmanuel Macron called on Monday for early legislative elections after a painful loss in the European Parliament elections at the weekend to the far-right party led by Marine Le Pen.
The elections are scheduled to be held on June 30, that is, less than a month before the start of the Olympic Games in Paris, with a second round being held next July.
Debt dilemma
France is struggling with a high debt-to-GDP ratio, which rose from pre-pandemic levels of about 98% to 110.6% last year.
Expectations indicate a further rise to 113.1% by 2025, adding to the country’s ongoing financial problems.
The Governor of the Bank of France, François Villeroy de Galhau, had warned of escalating debt servicing costs, which are expected to rise from 29 billion euros in 2020 to about 80 billion in 2027.
Experts believe that the way forward requires decisive action to avoid further cuts and restore market confidence in France’s economic stability.
Last April, Moody’s and Fitch Ratings maintained their stable outlook and credit ratings for France. Last year, Fitch downgraded France’s rating to “AA Negative” (AA-), with a stable outlook.
