France has not yet fully lost its "AA" rating. On Friday, October 24, the credit rating agency Moody's announced that it was maintaining France's rating at AA3 (the fourth-highest level), but was placing it on negative outlook. In other words, unless there is an improvement, the next decision by the American financial analysis firm will likely be a downgrade. Moody's therefore did not follow the agencies Fitch and S&P, which downgraded France's rating to A+ (the fifth level) on September 12 and October 17 respectively.
As with other agencies, however, the reason for this negative outlook was primarily political. "[This] decision (...) reflects the increased risk that the fragmentation of the country's political landscape will continue to impair the functioning of France's legislative institutions," Moody's explained. "This political instability risks hampering the government's ability to address key policy challenges such as an elevated fiscal deficit, rising debt burden and durable increase in borrowing costs."
On the other hand, Moody's did not express concern about an economic crisis in France: The banking sector was described as "robust," household and business finances as "sound" and public institutions as "highly competent." The country, the agency said, had "significant economic strength, supported by the country's wealthy and diversified economy."
