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Moody's said it has completed its periodic review of France's credit ratings, keeping the country's Aa3 rating supported by its wealthy, diversified economy and strong public institutions.

The agency said the fragmented parliament, political and social instability, a high and rising debt burden and weakening debt affordability remain the main credit challenges, and that the review does not amount to a new rating decision.

Debt burden exceeds expectations

Since the previous review, slower economic growth and a wider budget deficit have pushed France's debt burden above expectations, Moody's said. Government bond yields also rose faster than expected, and large-scale social protests broke out that could constrain fiscal consolidation efforts.

The Aa3 rating rests on the assumption that a budget aimed at reducing the deficit for 2027 will be adopted, and that financing costs and social tensions will ease somewhat over the coming months, according to the statement.

Budget process coincides with protests

Moody's noted that France's budget process for 2027 has coincided with the most widespread social protests in recent years. Despite the difficult political and social conditions, the agency said it expects legislation that reduces the budget deficit to be approved.

The deficit is forecast to fall to 5.2% of gross domestic product next year, down from 5.4% in 2026.

Risks from yields and political instability

The agency said strong and sustained fiscal efforts will still be needed after the 2027 presidential election to strengthen public finances, and that rapid consolidation will be difficult because of social tensions, a political environment likely to remain fragmented and weak growth.

The recent sharp rise in French government bond yields has increased risks to debt repayment capacity, Moody's said. The negative outlook on the rating reflects the risk that political instability makes it harder to address fiscal problems, the agency warned, adding that a failure to take measures to prevent further deterioration in public finances could lead to a faster weakening of core credit metrics.

Key takeaways

• Moody's completed its periodic review of France's ratings, which does not constitute a new rating decision.
• France's Aa3 rating is backed by a rich, diversified economy and strong public institutions.
• The deficit is projected to decline to 5.2% of GDP next year from 5.4% in 2026.
• The negative outlook reflects the risk that political instability complicates fiscal fixes.