LONDON (Reuters) – The outcome of France’s parliamentary elections is negative for the country’s credit rating, ratings agency Moody’s warned on Tuesday, as the lack of an absolute majority in the new National Assembly could make it harder to make decisions and control public debt.

Uncertainty hangs over the formation of France’s next government after the left-wing New Popular Front (NFP) alliance won early parliamentary elections without an absolute majority, leaving the assembly divided into three major blocs.

The left-wing alliance promises to nominate a candidate in the coming days, but uncertainty remains over the method and the balance of power within the group, while the presidential camp says it is ready to discuss with all members of the “republican arc”, excluding the National Rally (RN) and LFI.

“Given the constraints that any future government will face, it is unlikely that we will see a spending-led fiscal consolidation in 2025,” Moody’s warned in a note.

The warning echoes concerns expressed Monday by S&P Global, which warned that France’s credit rating could be “under pressure” if the economy continues to weaken or if there are prolonged government deficits.

Moody’s said France is unlikely to be able to impose further tax increases, given that its tax-to-GDP ratio is already the highest in the OECD, Moody’s added.

“Therefore, the budgetary implications of the election result are negative,” said the rating agency, whose current rating for France, of “Aa2” with a stable outlook, is one notch above those of S&P and Fitch.

“The current unprecedented circumstances will test French institutions and the effectiveness of policies,” Moody’s said.

(Reporting by Marc Jones; by Diana Mandiá, edited by Blandine Hénault)

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