(Reuters) – Credit ratings agency Moody’s revised France’s outlook to “negative” from “stable” on Friday, over mounting uncertainty that the country will be able to curb the widening budget deficits.
Spiraling fiscal deficit as spending exceeds tax revenues has put increasing pressure on the country’s Prime Minister Michel Barnier to take quick actions to turn things around.
Barnier presented France’s 2025 budget last week, which includes 60 billion euros worth of spending cuts and tax hikes, mostly targeting big companies. Pending approval, the budget aims to narrow the gaping budget deficit.
The government aims to cut its public deficit to 5% of GDP next year from 6.1% this year and is counting on a 1.1% economic growth both this and next year.
“The fiscal deterioration that we have already seen is beyond our expectations and stands in contrast with governments in similarly rated countries,” Moody’s said, while maintaining the sovereign’s credit rating at “Aa2.”
The ratings agency raised concerns over the country’s deteriorating debt affordability relative to its peers and added that the current turbulent political situation raises risks about the institutions’ ability to deliver sustained deficit reductions.
In a similar move, ratings agency Fitch cut France’s outlook to “negative” from “stable” in mid-October on fears of widening deficits and a complicated political backdrop hampering the government’s ability to shore up its finances.
(Reporting by Raechel Thankam Job in Bangalore and America Hernandez in Paris; editing by Alan Barona)