PFor France, the financial rating season will soon end. S&P, the most important rating agency, these organizations responsible for evaluating the repayment capacity of borrowers, delivers its verdict this Friday, November 29 in the evening, in the midst of budgetary turmoil…
While the country has exceeded 1,000 billion in debt accumulated since the start of the Macron era, and the deficit is expected to exceed 6% this year after an uncontrolled slippage in public finances, a motion of censure could precipitate France into a even more chaotic situation…
It is unlikely that S&P will go further and give us a simple A+. The rating agency has already downgraded France's rating last May, a few days before the dissolution, to AA –, the equivalent of 17/20.
However, in 2025 and 2026, France's public deficit (as a % of GDP) should exceed that of all the other countries in the euro zone, according to forecasts from the European Commission (at -5.3% and -5 .4%). Our debt should increase further (to 115.3% then 117.1%), unlike that of Greece, Spain or Portugal… The financial markets are not mistaken: France is borrowing now at rates close to (or even higher than) those of the former “Club Med” countries! The prospect of a motion of censure and the hypothesis of an absence of budget at the end of the year have widened the spread (that is to say the difference in rates) between France and Germany, at 82 basis points, a high point since 2012.
Shock on the markets
“The most likely is that S&P offers France a respite: the agency would only put France in negative perspective, at AA-, and would possibly downgrade next spring, if the French situation has not improved significantly. here there,” estimates Norbert Gaillard, economist, independent consultant and specialist in sovereign risk. Several arguments in fact plead in favor of “wait & see”. A few weeks ago, the Moody's agency, the one which rates France best, chose not to touch the Aa2 (the equivalent of an 18/20), even though the probabilities of deterioration were high, according to the specialists. The budgetary uproar is pushing agencies to wait until the situation becomes somewhat clear before assessing France.
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Kangaroo of the day
Answer
But S&P would have another reason to be cautious. A deterioration could have a significant impact, contrary to the decision of May. France would in fact move into category A… “However, the prudential rules of certain investment funds require holding a certain percentage of securities rated AAA or AA: the risk would therefore be to cause a shock on the markets and an increase in rate, estimates Norbert Gaillard. S&P will surely think twice, because it will not want to be the target of criticism from the French government or the European Commission. »
France also benefits from a certain number of structural advantages: a diversified economy, a developed financial network, a certain resilience… “French debt is well marketed and it is a sought-after product”, a fine connoisseur of the sector recently told us. walk. Which explains why we still benefit today from a certain leniency from rating agencies and investors. But how long will the cicada be able to sing?
