France's Budget Goal May Slip on Security Spending, Moody's Says

  • President Hollande promises more spending after Paris attacks
  • Terror in Europe unlikely to affect credit ratings: Moody's

French President Francois Hollande’s vow to increase spending on security in the wake of the Nov. 13 attacks in Paris suggest the nation may exceed its budget plans, according to Moody’s Investors Service.

Following the assaults that killed at least 129 people in the French capital, the premier said he’s ready to breach the European Union’s budget-deficit agreement to spend whatever is necessary to ensure security.

“The security pact is more important than the stability pact,” Hollande said in a joint session of France’s parliament in Versailles on Nov. 16, after promising more money for the intelligence services, more police officers and no cuts to the army’s personnel numbers.

Hollande’s vow “tells you something about the priorities of the French government,” Moody’s analyst Dietmar Hornung said at a briefing in London on Wednesday. That “may eventually lead to fiscal slippage.”

Moody’s base scenario is that terrorist outrages in Europe won’t affect economic activity enough to alter countries’ ratings, Hornung said. The company cut France’s credit rating by one notch to Aa2, the third-highest investment-grade level, with a stable outlook in September, citing slow economic expansion and political constraints on the country’s ability to reduce its debt burden.

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