France’s latest debt warning describes a country where governance is breaking down — and even doing too little, too late is barely possible

France avoided a credit downgrade from Moody’s, but the ratings agency painted a bleak picture of the eurozone’s second-largest economy that highlighted the risks from its intractable politics.

In an announcement late Friday, Moody’s kept France at Aa3—two grades below the U.S. and three below Germany—with a negative outlook, while ratings from peers Fitch and S&P Global are one notch lower.

France still boasts a wealthy economy and competent public institutions, according to Moody’s, but the political landscape threatens to paralyze the government and prevent it from making painful deficit-reduction steps.

The report flagged France’s divided parliament, which is often at odds with the government, as well as political and social instability. For over a month, the country has been consumed by protests that erupted into widespread riots last weekend.

At first, students decried the lack of investment in public education, then others joined in to speak out against the high cost of living as fuel prices soar due to the U.S. war on Iran. Other European countries have seen similar protests in what’s been dubbed the “Oct. 17 Movement.”

At the same time, France’s looming debt has sent bond yields to the highest levels in 24 years, flashing warning signs not seen since the eurozone debt crisis in 2011.........

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