Michel Barnier can say he is satisfied. At the end of a especially tough week for him, the Prime Minister obtained S&P’s support for his austerity plan on Friday 29 November. The American rating agency maintained the AA– rating assigned to French debt, equal to 17 out of 20.
A predictable status quo, insofar as S&P had already lowered France’s rating six months ago and is not in the habit of constantly changing its ratings. Even more surprising: Despite the political turmoil, experts are banking on the budget presented by Michel Barnier to effectively reduce the deficit. At this stage, the agency therefore retains the « stable outlook » granted to the French banknote, which was not a given.
S&P officials are not blind. they underline this in their analysis “French public finances have deteriorated” in recent months, e “Growing political fragmentation complicates” budget decisions. The agency even mentions “considerable risk” which are the proposals under discussion in Parliament “diluted” or fall into water. However, their central hypothesis remains that the authorities will succeed in reducing the public deficit “just under 1% of GDP [produit intérieur brut] » in 2025. It is indeed for the future that they are most doubtful: “Beyond 2025, the budget trajectory is uncertain” they write, “due to the very different budget proposals supported by groups across the political spectrum.”
A message perfectly received in Bercy. “By maintaining france’s rating, S&P demonstrates the credit granted to the government to reduce the deficit and restore our public finances”, the Minister of Economy, Antoine Armand, instantly rejoiced.“The agency, however, highlights the risk associated with political uncertainty that would challenge this trajectory,” he adds. A way for the minister to warn parliamentarians who would like to bring down the government during the budget phase…
In the heart of a chaotic debate on the budget which, according to the Prime Minister himself, risks resulting in a ” storm ” From a political and financial point of view, the verdict signed by S&P also sounds like a warning to the government itself: it must resist, not relax its efforts to restore public finances. But this is really the looming threat.