Moody’s maintained France’s sovereign rating at Aa3 with a negative outlook, following its downgrade in December 2024. The agency forecasts a public deficit of 5.2% of GDP in 2027, compared with the government’s 5% target, and public debt exceeding 120% of GDP. Moody’s is relying on the adoption of a 2027 budget that reduces the deficit and stabilizes the debt trajectory. The yield on French 10-year government bonds exceeded 5% in October, its highest level since 2002, although the average maturity of the debt, close to 8.5 years, temporarily cushions the shock. A further downgrade could be considered if the budget process stalls or the 2023 pension reform is abandoned for an extended period.
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