French govt collapse most likely outcome, negative for ratings, Scope says

A collapse of the French government was the most likely outcome of the country's current political turmoil and would be negative for its credit profile, European ratings agency Scope said on Tuesday.

Three main opposition parties said they would not back a confidence vote which Prime Minister Francois Bayrou on Monday called for September 8 over his plans for sweeping budget cuts.

The uncertainty weighed on French markets on Tuesday, sending the risk premium over German debt sharply higher.

The political impasse undermines France's plans to reduce its budget deficit to 4.6% next year, from 5.8% in 2024, Scope analysts said. Instead, Scope expects the deficit to only decline to 5.3% next year.

That will raise France's debt-to-output ratio to around 122% by 2030 from 113% last year, higher than the government's 117% target.

Scope will next review France's rating on September 26.