The European rating agency Scope downgraded France’s outlook on Friday, May 26, which means that its rating could be downgraded in the future, as happened at the end of April by the Fitch agency.
Scope explains his decision in a press release due to the risk of “the weakening of public finances”, in particular due to difficulties in “the implementation of reforms”. This action means it could downgrade France, currently at “AA” or the third-highest level on its grid, “within 12 to 18 months.”
“Economic dynamics” in slow motion
Among the risks weighing on French finances, the agency points out that “economic dynamics slowed down significantly in the second half of 2022.”
She is also not convinced of the deficit and public debt reduction trajectory, due to a “bad track record in terms of budget consolidation, a growing interest burden on the debt and risks linked to the implementation of the reform program.”
These risks are linked to “the absence of a majority in Parliament” and “sociopolitical disputes”, citing in particular the disputes against the pension reform.
Founded in 2011, Scope Ratings is headquartered in Germany with branches in the UK, Italy, France and Norway.
Rating downgraded by Fitch in April
At the end of April, the Fitch rating agency, one of the three largest in the world, had lowered France’s grade, due to the risk posed by “the political impasse and (sometimes violent) social movements” on the desired reforms. Emmanuel Macron.
A week earlier, the Moody’s agency had not made a rating. Agency S&P Global, which currently rates France “AA” with a negative outlook, will publish its findings on June 2.
The rating of these agencies has an impact on the interest rate at which investors lend money to France. On the 10-year loan, the benchmark maturity, the rate was 3.11% on Friday, near its highest levels of the year.
Bond rates have risen sharply for a year and a half, due to central bank policy implemented to try to control inflation.
Source: BFM TV
