France economy meltdown as Macron’s government turmoil leads to Moody’s downgrade

French banking stocks fell following a downgrade on seven banks’ ratings by Moody’s, as remains mired in political chaos.

Both French government bonds and its stock markets saw selloffs as a result of souring investment sentiment,  reports.

Moody’s, one of the Big Three credit rating agencies, said in a statement on Tuesday that the assessment reflected the “view that ’s public finances will be substantially weakened over the coming years, because political fragmentation is more likely to impede meaningful fiscal consolidation”.

The move from Moody’s came after it downgraded ‘s credit score, citing the country’s weak financial outlook and the uncertainties surrounding its political future.

The firm put out the statement before France’s roll-over budget was passed, which it expected, warning that, “looking ahead, there is now very low probability that the next government will sustainably reduce the size of fiscal deficits beyond next year”.

It also came as French President  appointed , who was ousted in a confidence vote earlier this month after both right and left-wing parties opposed his budget, which included €60 billion (£46.9million) in combined tax hikes and spending cuts.

Barnier was seeking the savings in a bid to reduce the country’s deficit to 5% of economic output next year – a decrease from the more than 6% this year.

has come under pressure from the EU for Paris to reduce its debt and stick to rules limiting deficits to 3 percent of GDP.

Getting the country’s finances under control will now be the task of his successor Mr Bayrou, a centrist ally of  who becomes ‘s fourth PM in a year.

France has been in a state of political deadlock for months. tried to break this in June when he called a snap parliamentary election.

However, the move backfired spectacularly, reinforcing the impasse as the left-wing New Popular Front alliance became the biggest party but no party was able to secure a majority.

Barnier’s government prepared the stopgap budget to ensure the country avoids a US-style government shutdown due to a proper budget bill remaining unsigned.

The special law, approved by France’s National Assembly on Monday, provides a stopgap until next year’s proper budget bill, drafted by the new Bayrou administration, is signed, as per .