Fitch, which downgraded the French rating last year to “AA-” with a stable outlook, reaffirmed this rating, which means that the risk of default is very low (AFP/Ludovic Marin)
Their opinion on the solidity of the French debt was particularly watched on Friday after a series of bad news concerning public finances since February. But Fitch and Moody’s, two of the largest rating agencies, left their ratings unchanged.
Fitch, which downgraded the French rating last year to “AA-” with a stable outlook, reaffirmed this rating, which means that the risk of default is very low. She had warned at the beginning of the month that she did not intend to change it.
Moody’s for its part did not strictly speaking “reaffirm” its rating of Aa2, with a stable outlook, a notch above that of Fitch, but did not modify it either.
France’s public deficit has slipped sharply to 5.5% of GDP in 2023 instead of the 4.9% hoped for, mainly due to lower revenues than expected, and with 110.6% of GDP in debt, it has the third highest debt ratio in the EU after Greece and Italy. Since February, the government has had to urgently announce two packages of budgetary efforts of 10 billion euros each.
The Minister of Finance Bruno Le Maire immediately “took note” of this news in a brief press release, adding that “this decision must invite us to redouble our determination to restore our public finances and meet the objective set by the President of the Republic : to be below 3% (of GDP, Editor’s note) deficit in 2027”.
The public accounts of France (AFP/Bertille LAGORCE, Sabrina BLANCHARD)
“We will stick to our strategy based on growth and full employment, structural reforms and the reduction of public spending,” assures the minister.
In their respective press releases, it is clear that neither Fitch nor Moody’s believes the deficit will return below 3% in 2027, which is a requirement from Brussels.
For Moody’s, however, the outlook could improve if the government “succeeds in adopting and implementing measures” to significantly reduce the debt. But the outlook and the rating itself could conversely deteriorate in the future if the debt situation deteriorates more in France than among its “peers”.
Fitch observes that France’s rating is justified by a “vast and diversified” economy, “strong and effective” institutions and “recognized stability”. But on the other hand, this rating is weakened by public finances and in particular the high level of debt.
– “Positive signal” –
The ratings assigned by the two agencies still classify French debt among those of “high quality”. France lost its triple A in 2012, marking the safest sovereign debts, like that of Germany currently.
“France is in a rather solid situation, the markets are lending to it at a rate which has not changed despite the bad economic news”, remarked Friday afternoon on franceinfo the director of the French Observatory of Economic Conditions (OFCE) .
The Minister of Economy and Finance, Bruno Le Maire, on April 24, 2024 in Paris (AFP/Archives/Ludovic MARIN)
For him, a downgrade would have rather had a “fairly strong impact in the political debate” before the European elections of June 9: which he saw as an argument for these agencies not to lower France’s rating, in order to ” not to play with fire during an election period.
The government will still have to face on May 31 the rating of the most watched agency, S&P, which places it on the same line as Moody’s, at AA, but with a negative outlook, that is to say that it has warned that the rating could fall in the medium term.
Mr. Le Maire will have to defend the Stability Program (“PSTAB”) and the forecasts it contains for a return of the public deficit to below 3% in 2027, before the deputies on Monday, then before the senators on Tuesday.
The oppositions remained discreet Friday evening. The general rapporteur of the budget to the National Assembly, Jean-René Cazeneuve (Renaissance), on the contrary immediately underlined that the maintenance of the notes was “a positive signal which validates our policy of reducing the deficit and the decisions taken at the beginning of year as soon as the slowdown in growth was confirmed.
© 2024 AFP
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