2023-05-28 11:56:40
The government had “very close discussions” with the financial agency Standard and Poor’s, which is due to publish its rating on the French debt on June 2. This was indicated by Prime Minister Élisabeth Borne in an interview broadcast on Sunday May 28 by Radio J. These « discussions » were led by the Minister of Finance Bruno Le Maire.
While the major rating agencies regularly assess the ability of states to repay their debt, France is worried. At the end of April, the Fitch rating agency, one of the three largest in the world, downgraded its rating, citing the risk posed by “political deadlock and (sometimes violent) social movements” on the reforms desired by Emmanuel Macron. A week earlier, Moody’s had made no changes.
“A poor record in terms of fiscal consolidation”
Friday, May 26, the European rating agency Scope, however, lowered the outlook for France. This means that it could downgrade the rating, currently at « AA » i.e. the third highest level of its grid, “within 12 to 18 months”.
Created in 2011 with its headquarters in Germany, Scope points out the risk of“weakening of public finances” of France and points out that “the economic dynamic slowed down significantly in the second half of 2022”. She is also unconvinced of the trajectory for reducing the public deficit and debt, due to a “poor track record in terms of fiscal consolidation, a growing debt interest burden and risks related to the implementation of the reform program”. These are related to “the absence of a majority in Parliament” and to “socio-political disputes”in particular against the pension reform.
The decision of Standard and Poor’s Global is in this context anxiously awaited by the government. “There were detailed explanations from Bruno Le Maire to Standard and Poor’s on everything we are doing to control our public finances”, said Elisabeth Borne on Sunday. The agency currently awards the rating of « AA » to France with a negative outlook.
The rise in bond rates
“We are carrying out reforms. We recently presented a trajectory of our finances until 2027 in which we want, as the President of the Republic had undertaken to do, to reduce our deficit to 2.7% (of GDP) in 2027”she argued.
The rating of these agencies has repercussions 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, close to its highest levels of the year.
Bond rates have risen sharply for a year and a half, due to the policy of central banks implemented to try to control inflation.
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