Moody's: Territorial Reform to Have No Immediate Credit Impact on French Regions

France's reorganisation of its 22 metropolitan regions into 13 enlarged territories will bring no immediate efficiency gains and is unlikely to affect the regions' collective creditworthiness, Moody's Public Sector Europe (MPSE) said in a report published recently.

MPSE's report, entitled "Territorial reform poses policy challenge for regions, but credit strength unaffected" is available on www.moodys.com. The rating agency's report is an update to the markets and does not constitute a rating action.

"Given the time it will take to identify and implement efficiency measures after merging regions with diverse economic and financial profiles, newly-elected regional governments will have little time to reach a consensus on budgetary programs after the December elections.", says Nicolas Fintzel, an analyst at MPSE.

The rating agency considers that the biggest credit challenge for the newly-created regional authorities will be to agree policy agendas that respond to local fiscal pressures and investment needs, although their overall financial strength and credit profile will likely be unaffected.

"We also expect that the reform will make capital markets access a viable option for the new regions. Increased budgets and funding requirements could lead regions to increase debt issuance, hence diversifying their funding sources away from the banks", Mr Fintzel adds.