“Buddha complies with EU fiscal regulations and expects to integrate public finances in the medium term”
international credit rating agency Standard & Poor’s (S&P) maintained France’s national credit rating.
According to AFP on the 30th (local time), S&P maintained France’s national credit rating at ‘AA-‘ the previous day and evaluated the national credit rating outlook as ‘stable’.
Last June, S&P downgraded France’s credit rating from ’AA’ to ‘AA-‘ for the first time in 11 years due to worsening financial conditions.
“Despite ongoing political uncertainty, we expect France to comply with european Union fiscal rules and gradually consolidate its public finances over the medium term, even if it takes time,” the rating agency said.
He added, “As political division deepens, approval of the 2025 budget is being delayed,” but added, “We expect the French authorities to pursue budget consolidation.”
France’s credit rating was revealed at a time when the French government was under pressure from the opposition party for a vote of no confidence over next year’s budget plan, which focuses on various spending reductions and tax increases.
The French government plans to lower the fiscal deficit, which is expected to be 6.1% of gross domestic product (GDP) this year, to 5% next year and below the EU standard of 3% in 2029.
The government hinted that it could pass its own budget bill without a vote in the House of Representatives in accordance with its constitutional authority, and the opposition party pressured to dissolve the cabinet by passing a no-confidence motion in the government.
Accordingly, Prime Minister Michel Barnier made a concession in his original budget plan and withdrew some plans to increase taxes and reduce social security.
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How could political instability impact France’s ability to reduce its fiscal deficit?
Interview between Time.news Editor and Economic Expert on France’s Fiscal Position
Time.news Editor (TNE): Welcome to our exclusive interview. Today, we’re diving into an essential topic regarding France’s current financial standing, especially in light of Standard & Poor’s (S&P) recent decision to maintain the country’s national credit rating at ‘AA-‘ despite ongoing challenges. Joining us for this discussion is Dr. Isabelle Lacroix, an expert in international finance and economic policy. Dr. Lacroix, thank you for being hear.
Dr. Isabelle Lacroix (IL): Thank you for having me. It’s a pleasure to discuss these critical financial developments.
TNE: Let’s start with S&P’s assessment. Maintaining the ‘AA-‘ rating is meaningful, especially after the downgrade last June. what does this stability mean for France’s economy?
IL: The ‘AA-‘ rating signals that, despite ongoing political instability, France is recognized for having a robust financial foundation. It indicates that S&P believes the country can adhere to EU fiscal regulations and will eventually regain fiscal discipline. It’s an critically important vote of confidence, especially in challenging times.
TNE: You mentioned political instability. Can you elaborate on the effects of current political divisions on the budget process in France?
IL: Certainly. The political landscape has become quite polarized, which has led to delays in crucial decisions, particularly regarding the 2025 budget. opposition parties are pressuring the government, and a vote of no confidence has been issued concerning next year’s budget plans. This kind of division complicates everything from spending cuts to tax increases, making it harder to implement cohesive fiscal policies.
TNE: Given the government’s target of reducing the fiscal deficit from 6.1% this year to 5% next year, how ambitious is this plan, especially considering potential pushback from various political factions?
IL: It’s quite ambitious, but also necessary. Reducing the deficit to below the EU’s threshold of 3% by 2029 is crucial for maintaining investor confidence and staying in compliance with EU regulations. However, achieving this will depend heavily on the ability of the current administration to navigate political obstacles and secure necessary reforms.
TNE: Do you see the French government managing to pass its budget without a parliamentary vote, as hinted? What implications might this have?
IL: If they pursue that route, it could set a precedent. Bypassing parliament in favor of implementing their budget could spark further political turmoil, potentially eroding public trust. However, it may also expedite necessary fiscal reforms, which are crucial for stabilizing the economy in the short term. It’s a tricky balance that they’ll have to negotiate.
TNE: Moving forward, what kind of reforms do you think are crucial for France to consolidate its public finances effectively?
IL: Key reforms should focus on both spending reductions and structural economic changes that stimulate growth. This includes enhancing productivity,investing in innovation,and possibly reforming labor laws to make the workforce more adaptable. Additionally, aligning social spending with lasting revenue sources will be vital.
TNE: Lastly, how do you foresee these fiscal developments impacting France’s position within the broader European Union?
IL: France is a crucial player in the EU, and how it handles its fiscal challenges will serve as a model for other member states, especially as the EU faces its own economic pressures. success in consolidating its public finances could strengthen France’s leadership role within the EU and serve as a catalyst for broader economic reforms across the region.
TNE: Thank you, Dr. Lacroix, for your insights. The challenges ahead are indeed complex, but it’s essential for France to navigate these waters effectively to maintain its economic health and position within Europe.
IL: Absolutely. Thank you for having me, and I look forward to seeing how this situation evolves.
TNE: Thank you, and thank you to our audience for joining us today. Stay tuned for further updates on France’s fiscal journey.