Moody's Affirms France at Aa3, Keeps Negative Outlook Amid Political Turmoil

Moody's kept France's sovereign credit rating at Aa3 on Friday, October 23, 2026, and left its outlook at negative. This is a confirmation, not a new action: Moody's first moved the outlook to negative from stable in October 2025 and maintained it in April 2026. The agency still considers Aa3 "high grade".

Moody's said the risk is that "fragmentation of France's political landscape" will keep impairing the legislature, and that political instability could hamper efforts to address the deficit and debt. A separate account of the rating action says the rating assumes a 2027 budget that reduces the deficit is approved, and that Moody's expects debt above 120% of GDP in 2027 and sees an upgrade as very unlikely in the short term. Moody's said it could return the outlook to stable if institutions narrow the deficit.

The backdrop is tense. France's 10-year yield rose above 5% this week for the first time since 2002, and the spread over German bunds hit a 15-year high. The deficit is about 5.5% of GDP, against the EU's 3% limit, and the finance ministry expects debt to reach 121.7% of GDP in 2027. Protests over living costs, fuel prices and education funding have spread, and more than 500,000 people marched last weekend.

Reports note that markets had largely expected a downgrade, so holding the rating may bring only temporary relief. Investors may watch the 2027 budget and further moves in French yields.