Moody's keeps France's credit rating at Aa3 with negative outlook

Credit rating agency Moody’s kept France’s sovereign credit rating at Aa3 on Friday 23 October and left its outlook at negative, CNBC and franceinfo reported. The decision was published after European markets had closed.

“The negative outlook reflects the increased risk that the fragmentation of France’s political landscape will continue to impair the functioning of the country’s legislative institutions,” Moody’s said in its report, according to CNBC. The agency said political instability, “also visible in the current social tensions”, risked hampering the government’s ability to deal with an elevated fiscal deficit, a rising debt burden and higher borrowing costs.

Moody’s said it could return the outlook to stable if French institutions are able to narrow the deficit, CNBC reported.

The review came after a week in which France’s 10-year government bond yield rose above 5% for the first time since 2002, and the gap with German yields reached its widest since 2011. French 10-year yields rose nearly 27 basis points over the week, the most of any major euro zone country, Reuters reported; they ended Friday at 5.04%.

According to CNBC, France’s budget deficit is about 5.5% of gross domestic product, above the European Union’s 3% limit, and the finance ministry has forecast debt of 121.7% of GDP in 2027. S&P Global and Fitch both cut their ratings on France in 2025.

See also: French bond spread widest since 2011 ahead of the Moody’s review.