Standard & Poor’s maintains France’s rating at “AA”, Bruno Le Maire welcomes a “positive signal”

2023-06-03 02:07:52

The decision was awaited with concern. On Friday, the rating agency S&P Global did not lower France’s credit rating, keeping it unchanged at the “AA” level. She invoked an expected improvement in the budgetary situation thanks in particular to the pension reform of the government of Emmanuel Macron. The Minister of the Economy Bruno Maire welcomed a “positive signal” in the evening. “Our public finance strategy is clear. She is ambitious. And she is believable,” he told the Sunday newspaper (JDD).

“This is mainly due to the revision of the government’s budget consolidation strategy”, writes the rating agency, citing as positive facts, in addition to the pension reform, the scheduled end of energy aid in favor of the fall in hydrocarbon prices. Five weeks ago, another agency, Fitch, on the contrary lowered France’s rating by one notch, triggering protests from the government, which has vowed to straighten the nation’s accounts.

The AA rating is among the highest rating categories, signifying a strong ability to repay debts. In Europe, Germany and the Netherlands are among the best rated countries, with the “AAA” level, which France lost in 2012.

The “negative” perspective maintained

In its note, the rating agency S&P, one of the three main ones with Fitch and Moody’s, nevertheless maintains its “negative” outlook on France, which means that the country is not immune to a lowering. S&P warns of “risks” relating to the execution of government budgetary objectives: “They include the absence of an absolute majority in the French Parliament since mid-2022, which could complicate the implementation of policies, as well as uncertainties within global and European economies, and tighter financing conditions”.

For several days, the government had been trying to avoid and then clear this possible sanction, which is all the more difficult for an executive to take to heart to display the image of a good manager. On Sunday, Prime Minister Élisabeth Borne declared on Radio J that “there were detailed explanations from Bruno Le Maire to Standard and Poor’s on everything we are doing to control our public finances”. On Wednesday, Bruno Le Maire had confirmed that he had met with the American agency in order to present the French “arguments”.

The impact of pensions

In the face of the numbers, however, France shows worse results than the other countries rated in the same category, had however noted the Fitch agency which lowered the French rating at the end of April, from “AA” to “AA-“. . The agency notes that the public debt will remain above 110% of GDP in the period 2023-2026, “with a persistent budget deficit, although declining”. Debt was at 111.6% of GDP in 2022, and the government is aiming for 108% in 2027. France has the highest debt of countries in the “AA” category.

After reaching 4.7% in 2022, the French public deficit should rise slightly this year to 4.9% before gradually declining from 2024, anticipates the government in its stability program published in recent weeks, which is counting on a return to the European budgetary peaks, i.e. below 3%, in 2027.

“This note comes to salute the solidity of our economy, the transformation efforts that we have undertaken and underlines the trajectory of recovery of public finances that we have initiated”, reacted to AFP the deputy Renaissance Jean-René Cazeneuve, general rapporteur of the budget.