On October 24, 2025, Moody's announced it was keeping France's sovereign rating at Aa3 but downgrading the outlook from stable to negative, citing heightened risks from political instability. This contrasts with recent downgrades by Fitch and S&P to A+. The move comes as the National Assembly reviews the 2026 budget and extends the contribution on high incomes.
On October 24, 2025, Moody's maintained France's debt rating at Aa3, the fourth highest of 21 levels, equivalent to AA- at other agencies. However, the U.S. agency downgraded the outlook from stable to negative, highlighting 'the increased risk that fragmentation of the French political landscape continues to impair the functioning of legislative institutions.' According to Moody's, this instability could limit the government's ability to tackle a 'high budget deficit, growing debt, and sustained rise in borrowing costs,' as well as the risk of reversing reforms like the 2023 pensions overhaul.
This decision differs from Fitch and S&P, which downgraded France to A+ in recent weeks, aligning the country with Portugal and Spain. Historically, France lost its triple A in 2012 from S&P, then from Fitch in 2013, and has faced a series of downgrades since 2023 due to political instability, budgetary uncertainty, and debt projected at 121% of GDP by 2028 per S&P, versus 112% at end-2024. Moody's acknowledges France's 'economic solidity,' with healthy household and corporate balance sheets and a robust banking sector.
The Economy Ministry 'took note' of the decision, emphasizing 'the absolute necessity to build a collective path toward a budgetary compromise.' It reaffirms the 5.4% deficit target for 2025 and a return below 3% by 2029, despite downward growth revisions by the IMF (0.7% in 2025). Meanwhile, the Assembly voted (279 for, 25 against) to extend the differential contribution on high incomes (CDHR) until the deficit falls below 3%, for households exceeding 250,000 euros annually with a minimum 20% tax rate. This measure is expected to raise 1.5 billion euros in 2026.
Debt servicing costs stand at 65 billion euros in 2025 and will exceed 70 billion in 2026, with 10-year yields at 3.43%, neck-and-neck with Italy. Markets reacted moderately to Moody's past downgrades in 2012, 2015, and 2017.
