Markets closely monitored Moody's review of France's Aa3 credit rating as the 10-year OAT-Bund spread reached its highest level since the 2011 Eurozone crisis. Despite widespread expectations of a downgrade due to fiscal pressures, Moody's maintained the rating at Aa3, providing relief amid market volatility. However, the agency warned that slower economic growth and widening deficits have pushed the national debt burden higher than previously anticipated.
The agency tied the rating to passage of a 2027 budget to cut the deficit, as the composite activity index returned to contraction and public debt rose in the second quarter.
Read the full storyThe agency kept its outlook negative and tied the rating to passage of a budget that cuts the deficit, as France’s borrowing premium over Germany rose above 170 basis points.
Falling new orders and declining employment add to economic pressures, while the agency puts French institutions’ ability to manage political divisions at the center of its assessment.