Nine days before the European elections, France suffered on Friday the first downgrade of its sovereign rating by S&P since 2013, the rating agency sanctioning the country’s public deficits and not believing at this stage in the restoration of the accounts promised by the end of Emmanuel Macron’s mandate in 2027.
The rating went from the third notch “AA” to the fourth “AA-”. A deterioration which should not lead to an increase in the rates at which France borrows, but which nevertheless remains an independent assessment of French public finances, the country still moving away from Germany, rated with a triple A, the maximum.
The surprise slippage in the public deficit for 2023, to 5.5% of GDP (gross domestic product), instead of the expected 4.9%, did not work in the government’s favor, despite a series of reforms which would, according to him to get back on track.
The rating agency certainly welcomes the adoption of reforms (pensions, unemployment insurance) since Emmanuel Macron came to power, but it estimates that French public debt as a proportion of GDP will not stop increasing, reaching 112 % of GDP by 2027 – compared to 109.9% in 2023 “due to larger than expected deficits in 2023-2027”.
S&P does not believe that the deficit will be reduced below 3% of GDP in 2027, as the government predicts (2.9%), and even expects 3.5% by that date.
No notable consequences
The government received a first warning in December 2022, when S&P placed France under “negative outlook”. The sovereign rating judges a country’s ability to pay its debts.
The Minister of Economy and Finance reacted by affirming that the spending and the widening of deficits since Covid were worth it, since they had helped save the French economy.
“Our strategy remains the same: reindustrialize, achieve full employment and maintain our trajectory to return below the 3% deficit in 2027,” declared Bruno Le Maire in an interview with Le Parisien, assuring that nothing would change in daily life. the French.
This decision “should not have significant economic consequences”, said Asterès economist Sylvain Bersinger in a note. For him, the justice of the peace remains the borrowing rate of a State on the markets.
Oppositions are unleashed
While the majority list is lagging behind in the polls for the European vote on June 9, the oppositions have seized the opportunity to undermine government policy.
“The catastrophic management of public finances by governments as incompetent as they are arrogant has put our country in very serious difficulties with record taxes, deficits and debts,” wrote Marine Le Pen, head of the National Rally deputies, on X.
“This is where the pitiful management of public finances of the Macron/Le Maire duo is leading us!”, wrote on to “courage” and “good management” to “put our accounts in order”.
The rebellious president of the Finance Committee of the National Assembly Eric Coquerel warned for his part that the government would “use this decision to justify further budget cuts”.
Stall
The argument was effectively taken up by the Minister of Public Accounts Thomas Cazenave: “this revision of the French debt rating by S&P only reflects an imperative that we already know: that of continuing the restoration of our public finances”, he said in a statement sent to AFP.
France now falls out of the group made up in particular of Belgium and the United Kingdom, but remains better rated than Spain or Italy.
With a double A even followed by a minus sign, France’s capacity to honor its debt maturities remains “very strong” according to the rating agency’s criteria.
S&P has been rating France since 1975. It is the first agency to have withdrawn its emblematic “triple A” from France in 2012, the best possible rating and symbol of excellent management, from which a small circle still benefits like from Germany and Australia.
In April, the two other main international agencies, Moody’s and Fitch, did not change the French rating.
The first rates France “Aa2”, the equivalent of an “AA” for S&P, the second has already been at the “AA-” stage since April 2023.
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