Moody's keeps France's credit rating at Aa3, outlook stays negative

Moody’s Ratings kept France’s sovereign credit rating unchanged at Aa3 on Friday, maintaining its negative outlook despite rising debt and political fragmentation that has made borrowing harder to rein in.

The agency cited France’s diversified economy and strong public institutions, but said the negative outlook was driven by political instability that could challenge efforts to address fiscal pressures.

“A significant and sustained fiscal effort will still be needed beyond the presidential elections of April and May 2027 to bring France’s public finances onto stronger footing and stabilise a debt burden that will exceed 120% of GDP in 2027,” Moody’s said, according to the Wall Street Journal.

Moody’s added that the Aa3 rating assumes France successfully adopts a deficit-reducing budget for 2027.

The decision leaves Moody’s rating above those of peers Fitch Ratings and S&P Global Ratings, which both cut France to A+ in 2025. Moody’s own rating remains two grades below the United States, three below Germany and level with the United Kingdom.

The verdict comes as France’s borrowing costs have surged: the 10-year French OAT yield hit a 24-year high of 5.142% on Thursday, per a Dow Jones wire carried by Morningstar, and the spread over German Bunds reached its widest since 2011. S&P’s next review of France is scheduled for November 27.

Sources: Wall Street Journal, Morningstar/Dow Jones