2024-10-25 22:46:00
New solemn warning for France. Two weeks after the Fitch agency, its competitor Moody’s in turn decided, on Friday 25 October, not to immediately lower the rating assigned to the French debt, maintaining it at Aa2, the equivalent of an 18 out of 20, but adding a “negative perspective”. If the fiscal consolidation promised by Prime Minister Michel Barnier does not materialize, or if the economy is hit for example by an escalation of the war in Ukraine, the rating risks being revised downwards within six months.
The American agency justifies this change of perspective “increasing risk” that the government is unable to act effectively to limit the budget deficit and the increase in debt. “The deterioration we have already observed exceeds our expectations,” explains Moody’s, and the weak French reaction “contrast” with the behavior of countries that, in the same situation, are restoring their public finances.
The new Minister of Economy, Antoine Armand, immediately took note of the decision, which was less brutal than the feared worsening. France is “capable of carrying out major reforms”, he assured, promising on behalf of the government to act “with energy” to restore public finances.
A simple warning before real punishment
Matignon and Bercy had been preparing for a possible worsening for weeks. Could Moody’s, one of the three main global agencies, still maintain the rating assigned to France, when Fitch and S&P have already reduced theirs to the equivalent of 17 out of 20? Given the deterioration of French finances and the opening of an excessive deficit procedure by the European Union this summer, the risk that Moody’s would sanction the country, lowering its rating by one notch for the first time in nine years, seemed high. Before a real punishment, however, the American agency preferred to send a simple summons, taking into account France’s heritage: “a large, healthy and diversified economy”a demographic data «more favorable» that in similar countries, “Strong institutions”.
The situation of the blue-white-red accounts worries the agencies responsible for measuring the solvency of the States. The public deficit which, after an initial slide in 2023, should have been reduced to 4.4% of gross domestic product (GDP) in 2024, continues to worsen. Michel Barnier will be relieved if it does not exceed 6.1% of GDP at the end of the year. A level far from the 3% envisaged by European standards and respected by the majority of states.
#Moodys #turn #issues #warning #France #public #deficit