A “phew” of relief for the government. The rating agency Standard & Poor’s (S&P) announced on Friday that it had maintained the French debt rating at AA, although it had given it a negative outlook. “This decision is consistent with the Government’s decisions on public finances,” said Economy Minister Bruno Le Maire when the decision was announced. At the beginning of summer, S&P had already decided not to lower the French rating even one level.
To justify its decision, S&P indicated that it expected “a reduction in public debt as a percentage of GDP from 2025”, “although very gradually”, and also estimated that “the impact of the increase in borrowing costs due to high interest rates be progressive. However, the rating agency was concerned about “significant risks that, if they materialize, could further reduce France’s budget flexibility”, citing, for example, “political fragmentation”.
“There is implicit coordination between the agencies,” underlines Christopher Dembik, considering that “it would have been strange if S&P were alone” in the autumn reviews of the main rating agencies. At the end of October, Moody’s also decided not to upgrade France’s credit rating, leaving it with its “AA2” rating with a “stable outlook.” The same verdict a week later with Fitch, which announced that it would not modify the “AA-” rating given to France.
“Successful communication”
Furthermore, Christopher Dembik also sees it as a result of “successful communication” on the part of the government. The executive “has launched a fairly ambitious spending reduction program in the 2024 budget” that “is in line with debt reduction commitments,” he said, “although these objectives will probably not be achieved.” Last June, S&P warned of “risks” to France’s ability to reduce its debt by more than €3 trillion.
Commitments of budgetary seriousness made by the executive and that found an attentive ear among the rating agencies. “It was absurd” to imagine a devaluation of France’s rating by S&P, reacted this Saturday morning Jean-Hervé Lorenzi, president of the Aix-en-Provence Economic Meetings, on Franceinfo. The economist mentions the recent pension reform “which, however, was brought to its conclusion against millions of people in the streets.”
Source: BFM TV
