Moody's downgrades France's credit rating outlook to negative

​​​​​​​By Gokhan Ergocun

ISTANBUL (AA) - Moody's affirmed France's credit rating at "Aa3" on Friday and downgraded its outlook to "negative."

"The decision to change the outlook to negative reflects the increased risk that the fragmentation of the country's political landscape will continue to impair the functioning of France's legislative institutions," said the international rating agency.

"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, thus leading to a more rapid weakening in France's key fiscal metrics than we currently expect," it added.

The agency added that political fragmentation raises the risk of a long-lasting reversal of key provisions of previously adopted structural reforms, in particular the 2023 pension reform.

If the suspension of the reform extends beyond a few years, it will exacerbate the government's fiscal challenges and negatively affect the economy's potential growth rate by reducing the labor supply, it noted.

- Fitch, S&P downgraded France's credit rating

Following increasing fragmentation and polarization in domestic politics and uncertainty surrounding public finances, France faced downgrades from credit rating agencies.

In September, Fitch Ratings downgraded France's credit rating to "A+" with a "stable" outlook.

Last week, Standard & Poor's downgraded France's credit rating to "A+/A-1" with a "stable" outlook.