“The S&P agency has validated France’s strategy to reduce its debt”

2023-12-02 18:16:38

How do you analyze the maintenance of France’s debt rating decided by the S&P agency?

Philippe Wachter: Today we have a very significant public debt, around 111%, 112% of GDP. The S&P Global Ratings agency assessed the government’s strategy to achieve a relatively rapid reduction. It validated the measures taken by Bercy in the face of the Covid and energy crisis. And she expressed her confidence in the effects of the reforms that the government has undertaken and plans to undertake to achieve this objective: the retirement reform, the future France Travail reform, that on unemployment benefit or even the end of also broad aid for energy.

All these measures will make it possible to improve the budgetary balance within a reasonable time frame. And as it is assumed that inflation will not be very high, and therefore interest rates will not be high either, the level of debt should decline by 2025, 2026 In this context, S&P says it is not worried about France.

Why is this important for the French economy?

P.W : Because we get into a lot of debt. In 2024, France will have to issue a very considerable amount of debt. And in this situation, we must pay as little interest as possible. The downgrade of our rating would have encouraged investors to be much more cautious about the France issuer and to request higher interest rates given the risk associated with the downgrade of the rating. The cost to our public finances would have been even higher.

What are the challenges to overcome so that France does not lose this rating?

P.W : The government’s obligation is to do everything to fulfill its growth commitments in order to maintain investor confidence. The most important point is that the government is committed to having a public deficit of around 3% of GDP in 2027.

It’s a somewhat ambitious goal, but not excessively so. It would have to succeed otherwise it would seriously undermine the confidence of the rating agencies in our economic policy: especially since they know that our previous governments have never kept their commitments in this area.