- We have revised downward our assessment of Finland’s economic growth prospects, as we believe that continuing subdued external demand adds to structural economic and demographic challenges.
- The weaker economic backdrop will further complicate efforts to consolidate public finances and reduce public debt, in our view.
- We are therefore lowering our long-term sovereign credit ratings on the Republic of Finland to ‘AA+’ from ‘AAA’.
- The outlook on the long-term ratings is stable.
- In our view, the French government’s budgetary position is deteriorating in light of France’s constrained nominal and real economic growth prospects.
- We believe that, due to policy implementation risk related to the budgetary consolidation and structural reforms, a recovery of the French economy could prove elusive and that France’s public finances might deteriorate beyond 2014, although this is not our base-case scenario.
- As a result, we are revising our outlook on France to negative from stable and affirming our ‘AA/A-1+’ long- and short-term sovereign credit ratings.
- The ratings on France remain supported by our view of the French economy’s high income per capita and productivity, its diversification, and its stable financial sector.
London, 19 September 2014 — Moody’s Investors Service has today announced its decision to maintain the negative outlook on France’s government bond rating, which it has affirmed at Aa1.
The agency’s decision to affirm France’s Aa1 rating reflects Moody’s view that, 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. The affirmation is also supported by renewed government commitment to accelerating the pace of structural reform, introducing a more consistent approach to economic policy, and proceeding with its budget saving plans.
That said, Moody’s decision to maintain a negative rating outlook reflects the rating agency’s view that the execution risks associated with implementing the government’s proposed structural reform initiatives are significant, given the strength of vested political interests that might oppose them and the poor track record in implementing such reforms.
In a related rating action, Moody’s has today announced its decision to maintain negative outlooks on the Aa1 ratings of Société de Financement de l’Economie Française (SFEF) and of Société de Prise de Participation de l’État (SPPE). The two entities’ Aa1 rating are affirmed, in line with the sovereign’s rating. Moody’s also affirmed the Prime-1 rating of SPPE, including its euro-denominated commercial paper programme. The senior debt instruments issued by the two entities are backed by unconditional and irrevocable guarantees from the French government.