France’s new PM Bayrou faces budgetary challenges as Moody’s downgrades credit rating

No grace period whatsoever. It was 25 minutes past midnight on Saturday, December 14, and François Bayrou had only been the new prime minister for a few hours when an unexpected press release arrived: Moody’s had downgraded France’s credit rating. According to the American credit rating agency, France’s public finances are likely to struggle over the next few years, and the country no longer merits the “Aa2” rating, the equivalent of 17 out of 20, that it had held until now. The rating has been dropped to “Aa3,” one notch lower, as at Standard & Poor’s and Fitch. A nasty welcome gift.

Bayrou has held no illusions about the state of public finances. The deficit “hasn’t disappeared as if by magic” after the vote of no confidence, warned former prime minister Michel Barnier during their handover of power on Friday. Bayrou replied, “No one is more aware of the difficulty of the situation than I am.” He went on to recall that, in 2007, he had made the need to reduce France’s debt the main thrust of his ill-fated campaign for the Elysée: “Everyone said: ‘He’s completely crazy, you can’t run a campaign on debt’.”

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