Moodys Downgrades Frances Credit Rating

In a surprise announcement, Moody’s rating agency downgraded France’s debt rating early Saturday, hours after President Emmanuel Macron appointed a new prime minister in a bid to stabilize a government that has been rocked by months of political turmoil.Moody’s decision — which cut France’s sovereign debt assessment to an Aa3 rating, three levels below the highest rating — will put pressure on the nation’s borrowing costs.It reflects doubt that a new government can mend a deteriorating fiscal situation that has made France one of the most financially troubled countries in Europe.Mr.

Macron tapped François Bayrou, a veteran centrist politician, on Friday as his fourth prime minister this year.Mr.

Bayrou’s predecessor, Michel Barnier, was ousted days earlier by far-right and left-wing lawmakers over his plans to rein in France’s finances with a belt-tightening budget that included 60 billion euros ($63 billion) worth of spending cuts and tax increases.The government collapse has heaped new burdens on France’s weak economy and left the country without a functioning budget.Mr.

Bayrou now has the urgent task of having to finalize a stopgap measure to avoid a potential government shutdown before the new year.Beyond that, he must also draft a new budget bill for 2025 and try to succeed where Mr.Barnier failed — by pushing it through a deeply divided Parliament at a time when investors have grown more worried about France’s creditworthiness.

The Standard & Poor’s and Fitch Ratings agencies have also downgraded France’s debt.Few expect Mr.Bayrou, one of Mr.

Macron’s top allies, to stabilize France’s roiling politics.Moody’s said it saw a “very low probability that the next government will sustainably reduce the size of fiscal deficits beyond next year.” The situation raises the risk of what the ratings agency described as “a negative feedback loop between higher deficits, a higher debt load and higher financing costs.”We a...