François Hollande.
Illustration by Peter Ansell for La Jeune Politique
Credit rating giant Moody’s has decided to maintain France’s credit rating as Aa1 or AA+, the second highest rating on its credit scale.
The stability of the credit rating came after France’s economic policies underwent their first major test of the year in the markets on January 24.
Moody’s outlook, however, is tinged with a hint of disapproval. Despite the maintenance of the credit rating, Moody’s has announced its skepticism of Hollande’s economic policies. The doubt is primarily due to the state’s enormous debt, which could potentially account for 95% of the country’s GDP at the end of the year.
Moody’s emphasized the deterioration of the financial strength of the state, belaboring the “continued decline in the competitiveness of the French economy.”
The credit rating agency questioned Hollande’s efforts at economic reform, most notably the “responsibility pact” that he outlined at the beginning of the year. The pact, which he detailed in his New Year’s address, aimed to lower employment costs for businesses by rewarding them for hiring more employees with lower taxes and greater flexibility in business activities.
According to Moody’s, the implementation of efforts such as the pact is frustrated by several factors of the French economy, particularly the labor market as well as political and social tensions. In fact, the responsibility pact met with criticisms from trade unions, who claimed that the government was catering to the whims of large corporations.
The French unemployment rate currently sits at 10.9%, a figure that Hollande had promised yet failed to lower in 2013.
Moody’s, however, stressed that France was not without its economic strengths, and would have to utilize them efficiently to propel market growth. The agency cited the “diversification of the French economy” and “significant wealth in terms of gross domestic product per capita” in its report.
