LONDON: France's credit rating could be threatened if far-right party leader Marine Le Pen reaches the second round of presidential elections, Moody's top European analyst said on Wednesday.
Asked whether Le Pen progressing to the second round would prompt Moody's to move the outlook on France's Aa2 credit rating to negative, Dietmar Hornung said, "That is the obvious thing."
Moody's contacted Reuters to clarify on Friday that Hornung's response to the question was "I cannot comment on that" and that his quoted follow-up response was not a comment on whether it would or would not move the outlook on the French rating.
In a follow up to Wednesday's question Hornung had given the example of how Moody's waited until after Britain voted to leave the European Union before cutting the British rating on a negative outlook.
It a statement on Thursday Moody's delivered a similar message, saying it would "assess whether the results of both rounds of the French presidential election increase the probability of policies being implemented that could weaken France's credit profile."
The threat to France's rating "wouldn't persist if then in the second round (Francois) Fillon or (Emmanuel) Macron or whoever wins," Hornung told Reuters. The first and second round of French elections are only two weeks apart, but just the impact of Le Pen making it through could shift politics to the right on issues such as immigration.
"The more soft risk is that they shape policy agenda and move political forces towards more protectionism," Hornung said.
An unexpected win for Le Pen's National Front (FN) party would have even greater consequences.
As in Italy, where the Five Star Movement has raised the prospect of leaving the euro, Le Pen has suggested a return of sorts to the French franc.
"If they (FN) were in power, they would be inclined to move towards a euro exit," Hornung said of France.
On Italy, he said: "If one of the four systemically important countries moves closer to a loss of investment grade, given the interconnectedness in Europe, it could have implications beyond the country itself."
Moody's now rates Italy Baa2 - two levels above sub-investment grade - with a negative outlook.
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