Moody’s Downgrades France, Blames “Political Constraints”, Sees No Material Reduction In Debt Burden
Citing “continuing weakness in the medium-term growth outlook,” Moody’s has downgraded France:
- *FRANCE CUT TO Aa2 FROM Aa1 BY MOODY’S, OUTLOOK TO STABLE
Apearing to blame The EU’s “institutional and political constraints,” Moody’s expects French growth to be at most 1.5% and does not expect the debt burden to be materially reduced this decade.
Moody’s Investors Service has today downgraded France’s government bond ratings by one notch to Aa2 from Aa1. The outlook on the ratings is stable.
The key interrelated drivers of today’s action are:
1. The continuing weakness in France’s medium-term growth outlook, which Moody’s expects will extend through the remainder of this decade; and2. The challenges that low growth, coupled with institutional and political constraints, poses for the material reduction in the government’s high debt burden over the remainder of this decade.
At the same time, France’s credit worthiness remains extremely high, supporting an Aa2 rating. The country’s significant strengths include: (i) a large, wealthy, and well-diversified economy with a high per capita income, (ii) favourable demographic trends as compared to other advanced economies, and (iii) a strong investor base and low financing costs. The rating and its stable outlook are also supported by the country’s efforts to stabilise its public sector finances and initiatives recently deployed or announced to arrest the erosion of the economy’s competitiveness.
In a related rating action, Moody’s has today announced its decision to downgrade the ratings of the Société de Prise de Participation de l’État (SPPE) to Aa2 from Aa1. The SPPE’s short-term rating was affirmed at P-1, including its euro-denominated commercial paper programme. The outlook on the ratings is stable. The debt instruments issued by the SPPE are backed by unconditional and irrevocable guarantees from the French government.
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