Moody's downgrades French credit rating to Aa3 for 'political division'

International credit rating agency Moody's Investors Service has lowered France's sovereign credit rating, which has been in a political crisis for months, by one notch to Aa3 from Aa2.

"France's public finances will be greatly weakened by political divisions," Moody's said in a statement today (14th), adding that "the scope and scale of measures to reduce large deficits will also be limited."

The decision comes 10 days after France's lower house of parliament, which was confronting the government over next year's budget, distrusted the coalition government led by Prime Minister Michel Barnier.

French President Emmanuel Macron has appointed François Byru, the leader of Modem, a pan-women's centrist party, as the new prime minister, but Moody's has predicted it will not be easy for France's fiscal deficit to shrink.

"In a very politically divided environment, it is very unlikely that the next government will continue to reduce the size of its fiscal deficit," Moody's noted.