Rating agency Moody’s has warned that France may be the next nation at risk of losing its Aaa debt rating.
The agency says although France’s economy has ample capacity to absorb shocks, the Aaa rating rests on investor confidence in the government’s ability to cope with “unforeseen challenges”.
France now has the weakest in debt metrics of all its peers and while its current financial strength is “very high”, there is the increased likelihood that France will be called upon to support other sovereign debt sheets or its own banking system.
Such contributions could “give rise to significant new (contingent) liabilities for the government’s balance sheet”, says Moody’s.
“Moody’s notes that the French government now has less room for manoeuvre in terms of stretching its balance sheet than it had in 2008”, the ratings agency states.
The French economy will be closely monitored by the agency over the next three months in order to assess progress and any potential liabilities.