France’s Fiscal Discipline in Focus as Moody’s Downgrades Credit Outlook
France's central bank governor Francois Villeroy de Galhau has drawn a hard line on fiscal discipline, insisting the 2026 deficit must not exceed 4.8% of GDP to stay on track for a 3% target by 2029. "Gradual suffocation" awaits if this threshold is breached, he warned in an interview with La Croix. The National Assembly's current draft budget proposes a 4.7% deficit, but Prime Minister Sebastien Lecornu signals flexibility may be needed to avoid political turmoil.
Moody's Ratings responded swiftly to the political uncertainty, downgrading France's credit outlook from stable to negative. The agency cited legislative chaos and political fragmentation as key concerns. This comes as President Macron's pension reforms continue to fuel public backlash, further complicating fiscal consolidation efforts.
