Moody’s maintained its negative rating on France on Friday but — despite earlier reports — did not deal the struggling economy a downgrade.
Moody’s kept its Aa1 overall rating for the country’s debt, but warned of significant risks in the government’s efforts at restructuring to deal with its heavy fiscal challenges.
Moody said France’s still manageable debt burden justified keeping the rating where it is, even as the country struggles.
“Despite negative credit pressures, the country retains significant credit strengths, including the size and wealth of the economy, as well as its affordable debt burden despite a continuous, gradual erosion of its economic and fiscal strength.”
It also pointed to the government of President Francois Hollande’s commitment to undertake strong reforms to cut the fiscal deficit and improve growth prospects for the longer term.
On the other hand, Moody’s warned that Paris faces formidable hurdles, “given the strength of vested political interests that might oppose them and the poor track record in implementing such reforms.”
On Tuesday, Hollande’s government survived a confidence vote in parliament after he pushed leftist opponents of his reform agenda out of the cabinet, replacing them with supporters of budget cuts and other austerity measures.
Prime Minister Manuel Valls has argued that the problem with the French economy is a lack of competitiveness which reforms could help change.
On Thursday, the daily French newspaper l’Opinion sparked an uproar that hit markets when it reported that France’s overall credit grade would be cut by Moody’s.
The Finance Minister Michel Sapin called for financial market authorities to investigate the report.