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France’s creditworthiness in danger: Moody’s sounds the alarm!
Moody's lowers France's credit rating to negative. Political instability and high debt are weighing on the economy.
France’s creditworthiness in danger: Moody’s sounds the alarm!
France needs a tailwind because the economic situation is anything but rosy. In a recent report borkenerzeitung.de It becomes clear that the rating agency Moody's has given the country's creditworthiness a negative outlook. The rating remains at Aa3, but the previously stable outlook is no longer able to cope with the current political and economic conditions.
Political disunity as a problem factor
The reasons for this critical development are diverse. Moody’s cites political fragmentation as one of the main factors that could threaten stable fiscal policy. The reforms that are essential for growth – especially the controversial pension reform – have stalled. Prime Minister Sébastien Lecornu, whose position has already been in jeopardy several times, is desperately trying to find a compromise for necessary austerity measures. He even had to cancel the pension reform to win support from the socialists, which shows how messy the situation is.
The problem is exacerbated by the fact that France has the highest debt in the EU, at around 3.3 trillion euros. The debt ratio is 114 percent of gross domestic product, which is the third highest in the European Union, behind only Greece and Italy. Loud tagesschau.de A rising debt ratio could reach 121 percent by the end of 2028.
Fast-track downgrades
Moody’s is not the only rating agency that is critical of France. S&P only downgraded the rating on October 18, 2025. This second downgrade in a matter of weeks shows the urgency of the situation. The credit rating drops from “AA-/A-1+” to “A+/A-1”. S&P describes political instability in France as the worst since the founding of the Fifth Republic in 1958. This will have a negative impact on economic growth, putting pressure on policymakers.
These downgrades could reduce the high cost of borrowing, which would put pressure on the already strained fiscal situation. S&P estimates that new debt could reach 5.4 percent of gross domestic product in 2025, an enormous challenge that the fifth head of government will have to overcome in less than two years.
What does this mean for the future?
The upcoming presidential elections in 2027 are already casting their shadows. President Emmanuel Macron does not have a clear majority in parliament and faces increasing fragmentation. In such an uncertain political climate, it will not be easy to overcome the economic challenges and regain the trust of international investors.
In summary, the situation in France is tense. With high debts and a crisis-ridden political landscape, the country is facing massive challenges that can only be overcome in the next few years with a good hand and strategic decisions. Experts and observers agree: France needs a clear course to avoid falling further into economic isolation. Further information on this topic can be found at spiegel.de.