Market: S&P maintains France’s rating, Bercy welcomes “a positive signal”

PARIS (Reuters) – Rating agency S&P Global Ratings on Friday maintained France’s credit rating at “AA/A-1+”, which Economy Minister Bruno Le Maire hailed as a “signal positive”.

The rating agency, however, maintained a negative outlook, which may open the way to a downgrade of the rating, due to risks weighing on the implementation of the government’s budgetary objectives. Among these risks identified by S&P are a prolonged economic slowdown or a slippage in public spending.

At the end of April, another rating agency, Fitch Ratings, lowered its rating by one notch to “AA-“, citing in particular a political and social context likely to complicate the reduction of public spending. Bruno Le Maire then regretted “Fitch’s pessimistic assessment”.

Questioned by the JDD after the decision of S&P Global, the Minister of Economy and Finance welcomed a “positive signal”, considering that the French strategy in terms of public finances is “clear”, “ambitious” and “credible”.

Bruno Le Maire, who recently had “very close discussions” with S&P analysts according to Elisabeth Borne, reaffirmed to the JDD the objective set last April, in the stability program sent to the European Union, to bring back the deficit at less than 3% of GDP in 2027 and debt at 108% of GDP on the same date.

This objective must be achieved thanks to past or future reforms (unemployment insurance, pensions, green industry), the exit from “whatever the cost” and the reduction in public spending, detailed the minister to the JDD.

“On June 19, the Public Finances Conference will be an opportunity to identify the first savings measures, for several billion euros, that we will implement as part of the finance bill for 2024. And, in the summer, the public finance programming law will specify the course until 2027”, he further specified.

“This debt reduction and deficit reduction strategy, we must stick to it with the most total firmness. I am the guarantor of this firmness”, he added.

In its assessment, S&P welcomes the reform of unemployment insurance and pensions.

The rating agency believes that tighter credit access conditions and still high inflation will weigh on economic activity in France in 2023 and 2024.

It predicts that the French budget deficit will decrease to 3.8% in 2026, from around 5% in 2023, and that the debt will remain above 110% of gross domestic product.

S&P Global (formerly Standard & Poor’s) lowered France’s outlook to “negative” last December, instead of “stable” previously, due to growing risks to public finances and the budgetary consequences that may result.

(Written by Blandine Hénault and Jean-Stéphane Brosse, with contributions from Leigh Thomas)

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