The fall of Michel Barnier's government “is an event that is negative for credit [de la France]“, estimates Moody's. For S&P, this “complicates the budgetary perspective”. AWhile the second economy in the euro zone is singled out by Brussels for its excessive deficit, the rating agencies are warning, Thursday, December 5, of the possible consequences of this political rebound on the rating of the second economy in the euro zone.
In a press release, Moody's judges that “this event (…) reduces the probability of a consolidation of public finances, and contributes to a greater risk premium [pour les marchés], as well as a higher cost of debt”.
Referring to the censorship of the government on Wednesday evening by the deputies, the agency adds that “this vote reflects the country's fractured political environment” et “aggravates budgetary challenges” who await the next government. “A new Prime Minister is likely to face the same difficulties that Michel Barnier encountered”she summarizes.
S&P, for its part, estimates that “the possibility that an amended draft budget for 2025 will be validated before the end of 2024 is low”. “At this stage, the most likely scenario is that the authorities” have recourse “to a special law”, continues the agency, which however, highlights France's strengths: “the diversity of its economy”, “the liquidity in its financial sector”, “the ample reserves of its private sector” or even “its membership of both the European Union and the Eurozone”.
The Barnier government's objective was to reduce the public deficit to 5% of gross domestic product (GDP) in 2025. “Currently, we expect the country's annual deficit to reach 6.3% of GDP in 2024, 5.3% in 2025 and 4.7% in 2026, well above the European Union ceilings” , estimates Moody's.
Moody's and Fitch issued a warning to France in October by lowering its outlook to negative. On November 30, S&P kept the country's “AA-” rating and stable outlook unchanged.
As for the Scope Ratings agency, it lowered the French rating to “AA-” in the fall with a stable outlook. She now believes that “censorship against Michel Barnier derails the implementation of France's multi-year budget plan and its reform program.”
