Moody's spares France: a reprieve conditional on cohesion

The downgrade was expected, but it did not come. On the evening of Friday 23 October, the agency Moody's chose to leave the rating of French debt untouched: it remains at Aa3 with a negative outlook, according to an AFP dispatch carried by Allnews. The news came at the end of a week in which the National Assembly rejected the revenue section of the Social Security budget and the country was preparing for another day of protests under heavy security.

The facts

Moody's specified that its publication "does not announce a rating action", RFI reports. In other words, the agency is neither raising nor lowering the rating: it is waiting. And it says clearly what it is waiting for. According to AFP, the current rating rests on three assumptions: the adoption of a 2027 budget that reduces the deficit, some easing of financing costs and a calming of social tensions in the coming months.

The context makes the decision remarkable. According to Agence France Trésor, which publishes the official list of the State's ratings, Fitch and S&P already rate France A+, one notch below Moody's. A downgrade would therefore have aligned the three major agencies, as Le Figaro and L'Opinion pointed out on Friday evening. The Canadian agency DBRS, for its part, has maintained an AA rating with a negative outlook since 18 September.

The budget on which Moody's is basing its bet is the one Sébastien Lecornu presented in September. According to Public Sénat, it provides for an effort of around 54 billion euros, or 1.8 points of GDP, "with fiscal stability". Without corrective measures, the deficit would approach 6.5% of GDP in 2027, according to the Prime Minister. With his plan, it would fall to 4.8%, or 5% including new defence spending. For 2026, the 5% target will not be met: the government promises to stay below 5.5%.

The positions at stake

The government sees it as a victory of method. Sébastien Lecornu welcomed on X a decision that "defeats the declinist forecasts", according to AFP. He thanked the political forces that, without a majority, agreed to debate the budget on a normal timetable, and set the course: a budget passed by the end of the year, with the deficit brought down to 5% of GDP. His argument is simple: France's financial credibility is decided in Parliament, and the country still has a path to reassure its lenders.

On the right, people point out that this reprieve settles nothing. During the debate on the Social Security budget, MP Justine Gruet argued that the imperative of restoring the public accounts was not being met, as LCP reported. The cost of the debt is rising, and every additional point of interest weighs on all the other budgets.

On the left, the criticism focuses on how the effort is shared. In the Senate, the head of the Socialist group, Patrick Kanner, accused the government of making unfair choices for the least well-off, and argued that pensioners, employees, civil servants, the sick and students would once again foot the bill, according to Public Sénat. The Socialists are calling for more revenue, through the Zucman tax on the very largest fortunes or the reinstatement of the wealth tax (ISF). The Prime Minister replied that "all the Zucman taxes in the world" would not avoid the debate on public spending.

Analysis

This decision is not a seal of approval. It is a conditional reprieve, and its conditions deserve careful reading. A rating agency explicitly lists social peace among the criteria for the soundness of France's credit. The question of national cohesion is therefore no longer only moral or political: it is becoming financial.

This should give every camp pause. Those who think the accounts can be restored by asking modest pensioners, civil servants and the sick to bear most of the effort have the wrong diagnosis: a budget seen as unfair fuels anger, and anger pushes up interest rates. Those who think the debt can be ignored are also wrong: a country that depends on its creditors loses part of its sovereignty. General de Gaulle understood this in 1958, when financial recovery went hand in hand with the restoration of the State.

The reprieve also comes on a day of tense mobilisation. According to AFP, 70,000 police officers and gendarmes are deployed this Saturday, compared with 60,000 on 17 October. An opinion piece published by Libération argues that, six months before the presidential election, the authorities are responding to the social crisis more with order than with dialogue. One may dispute this judgement. One cannot deny that the debt and the street are now linked.

Conclusion

The government has a few weeks. It can use them to force things through, or to build a compromise. The second path requires a gesture: bringing into the effort those who have the most means, through a temporary contribution from the very largest fortunes, in exchange for real protection of small and middle pensions and of public services. It would be a budget of recovery and cohesion at the same time. It remains to be seen whether the political forces, as 2027 approaches, will be able to put the country's interest ahead of their calculations. That, in the end, is the only rating that counts.

Article written with the help of artificial intelligence.