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Moody’s warns about France’s credit rating due to early elections

Early parliamentary elections in France are bad for the country’s credit score, ratings agency Moody’s has warned.

“This early election increases risks to fiscal consolidation,” Moody’s said in a statement late Monday, describing it as “credit negative” for the country’s Aa2 rating, which is one notch above the equivalent rating from Fitch and S&P Global.

“Potential political instability is a credit risk, given the challenging fiscal framework that the next government will inherit,” he added, saying that France’s currently “stable” rating outlook could be reduced to “negative” if its parameters of debt worsened further.

“A weakening of the commitment to fiscal consolidation would also increase downward pressure on credit,” Moody’s said.

French President Emmanuel Macron called an unexpected legislative election on Monday following the crushing defeat in the European Parliament vote over the weekend for the far-right party led by Marine Le Pen.

Macron’s unexpected decision, which amounts to rolling the dice on his political future, could give great political power to the far right after years on the sidelines and neutralize his presidency three years before its end.

The legislative vote will take place on June 30, less than a month before the start of the Paris Olympic Games, with a second round in July.

Moody’s pointed out that the country’s debt burden, which is already above 110% of GDP, is higher than that of other similarly rated countries and has seen an almost continuous increase since the 1970s due to persistently structural budget deficits. high.

S&P Global downgraded France earlier this month over the same concerns, and Moody’s flagged what would prompt it to do the same.

“The outlook, and ultimately the ratings, could turn negative if we conclude that the deterioration in debt affordability – which we measure as interest payments relative to income and GDP – will be significantly greater in France than in its competitor countries,” he said. underlined. she said.

Source: Terra

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