2024-04-26 22:40:09
The Ministry of Finance, in Paris, March 29, 2024. GONZALO FUENTES / REUTERS
The executive gained a few more weeks. The rating agencies Moody’s and Fitch, which issued their opinion on the quality of French debt on the evening of Friday April 26, chose not to sanction France, despite the deterioration of the country’s public finances. The Moody’s agency, whose decision was more feared, maintained its Aa2 rating with a stable outlook, judging the default risk to be very low. Fitch, which lowered the French debt rating by one notch a year ago, left it unchanged at AA–.
“I take note of the decision of the Fitch and Moody’s agencies to maintain France’s sovereign debt rating unchangedreacted in the evening, the Minister of Economy and Finance, Bruno Le Maire. This decision should invite us to redouble our determination to restore our public finances and meet the objective set by the President of the Republic: to be below 3%. [du produit intérieur brut (PIB) du pays] deficit in 2027.”
The government avoided any triumphalism on Friday evening. The respite for Bercy will indeed be short-lived. Standard & Poor’s, the oldest and most prestigious of the three major rating agencies, will in turn release its analysis on French debt on the evening of May 31, a few days before the European elections. A deadline which worries the executive more, even if Friday’s announcements were also eagerly awaited.
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Rating agencies publish a report card every six months on France’s finances, the importance of which has increased since the end of 2022. The succession of very costly crises – Covid-19, then inflation – has in fact fueled their analysts’ concerns about the country’s fiscal trajectory.
On December 2, 2022, Standard & Poor’s warned that it could lower the rating of French debt in the medium term. A rare alert, which then went almost unnoticed. Five months later, in the midst of pension reform, Fitch lowered its rating to AA−, worrying not only about the trajectory of the government’s debt and deficit, but also about “political impasse” and “ social movements » shaking the country, “a risk for the reform program” of the President of the Republic, Emmanuel Macron. The threat of a new financial threat has since loomed over Paris.
Loss of influence of major rating agencies
In theory, a rating downgrade can result in an increase in the cost at which a country finances itself on the markets. As France has to borrow nearly 300 billion euros this year, with rates now moving above 3%, it must closely monitor the agencies’ analyses. Bercy already estimates that the debt burden will increase under the effect of the rise in rates, and that it will exceed 72 billion euros in 2027, hot on the heels of the national education budget (82 billion).
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