After Fitch’s bad rating in April, it’s a relief, at least temporary, for the government: S&P Global (formerly Standard and Poor’s), one of the three most influential American rating agencies, has maintained France’s rating on Friday June 2, keeping it at the “AA” level – with a negative outlook.
The Minister of the Economy, Bruno Le Maire, welcomed “a positive signal”. “Our public finance strategy is clear. She is ambitious. And she’s believable. he told the JDD.
The deadline was taken very seriously by a government, anxious to display a solid economic policy and a serious budget. Questioned on Sunday, the Prime Minister, Elisabeth Borne, had affirmed on Radio J that the Minister of the Economy had had “very close discussions” with the agency “on everything we do to control our public finances”. The government will be “intractable” on reducing deficits, had hammered Bruno Le Maire on France Inter on Wednesdayjudging “convincing” his “good arguments” developed before S&P, while acknowledging “very frankly” ignore what the verdict of this agency would be.
The downgrading of the rating may have the effect of increasing the interest on French loans to investors, the latter demanding more to agree to lend to France. However, the interest rates on ten-year loans have already been at high levels for eleven years due to rate hikes by the European Central Bank, which is fighting against inflation and is mechanically driving up the loan rates for euro zone states.
S&P has rated France since 1975 and has downgraded its rating only twice. It was also the first to have withdrawn from France its emblematic “triple A” in 2011, the best possible rating and symbol of excellent management, from which a small circle still benefits from the three agencies, like the Germany, the Netherlands and Australia.
At the end of April, Fitch highlighted “political deadlock” of the government to justify its degradation – a comment which aroused the ire of Emmanuel Macron: it “is deeply mistaken in his political analysis”he lambasted in an interview with the French daily Opinion. For its part, Moody’s mentioned the “weak mandate” available to the government in a comment which did not, however, lead to a downgrade. The European rating agency Scope Ratings, less watched than its counterparts but which lowered its outlook for France by ” steady “ To “negative” on May 26, invoked “the absence of a majority in Parliament”likely to complicate the trajectory of deficit and debt reduction.
In the face of numbers, however, France seems better rated than it deserves, noted Fitch. It has the highest indebtedness of countries in the “AA” category, and has twice the median indebtedness in this category. Regarding the deficit, the rating agency anticipates it at 5% of gross domestic product (GDP) this year and 4.7% next year, again well above the countries rated in this category.