PARIS (Reuters) - Moody’s restated its negative outlook on France’s top-notch credit rating on Thursday, saying after Francois Hollande’s May 6 presidential election win that it needed more time to assess how France will manage its public finances in a time of anemic growth.
Socialist Hollande took over from conservative Nicolas Sarkozy on May 15 and has named an interim government, but ratings agency Moody’s said it was waiting to see what happened after June parliamentary elections.
That election in two rounds on June 10 and 17 will determine whether Hollande has a left-wing majority in the lower house of parliament to implement a tax-and-spend program that includes partial rollback of pension reforms and an increase in certain benefits such as family back-to-school grants.
“During the second half of the year, and in particular after upcoming general elections in June, Moody’s expects to get a clearer picture of the actual government program to be adopted and the risks to achieving policy targets stemming from ongoing challenges in the euro area,” Moody’s said in a note.
The ratings agency first changed its outlook on France’s triple-A credit rating from stable to negative on February 13, citing growing financial and economic risks triggered by the euro zone debt crisis.
At the time it said it was worried about Europe’s ability to undertake the reforms needed to address the crisis and said the region’s weak economy could undermine austerity drives by governments to combat bloated deficits and debt.
Hollande has said he wants to temper a German-inspired focus on austerity in the euro zone and also find ways to shore up the region’s ailing economy, although doubts remain over exactly how he intends to generate more growth.
The Socialist leader has already run into German opposition with his plans to issue mutual euro bonds, and at a European summit on Wednesday Chancellor Angela Merkel showed no sign of backing down.
“Even though the new President has made it clear that he is particularly focused on restoring economic growth in an environment of fiscal austerity, the path to a robust economic recovery is not yet clear and remains an uncertain variable in France’s debt equation,” Moody’s said on Thursday.
In January, Standard & Poor’s downgraded the credit ratings of nine euro- zone countries, stripping France and Austria of their coveted triple-A status.
Reporting By Leigh Thomas; Writing By Vicky Buffery; Editing By Brian Love