Moody's agency warns France against repealing pension reform

The agency, which currently assigns an Aa2 rating with a stable outlook, warns that the outlook could be lowered to "negative" depending on the impact of political negotiations on the fiscal or growth trajectory.

Without a clear majority, "voting for laws will certainly be difficult." “Given the constraints” with which a brand new government must contend, “fiscal consolidation through (a reduction) in spending in 2025” is “unlikely,” judges Moody’s in a commentary. An increase in revenue is also “unlikely”.

The election results are unfavorable for France's ability to borrow under favorable conditions, judges Moody's.

Responsible like its counterparts Fitch and S&P for assessing the capacity of countries to repay their sovereign debt, the agency is mainly concerned with the possible increase in the cost of interest paid for the debt.

“A decline in government commitment to fiscal consolidation would increase the unfavorable pressure” on credit, says the agency. France's 10-year interest rate changed little after the second round of legislative elections, but increased more significantly after the first round.

The repeal of reforms, "such as labor market liberalization and pension reform", would weigh on the rating if it affected the country's growth or fiscal trajectory.

Monday evening, the S&P Global agency already warned that France's credit rating would be "under pressure" if the country "failed to reduce its significant public deficit".

The American agency downgraded France's rating from the third "AA" notch to the fourth "AA-" at the end of May, a few months after the announcement of a public deficit much higher than expected.