Following warnings from Moody’s and Fitch, the rating agency S&P Global Ratings (formerly Standard & Poor’s) decided to maintain France’s sovereign debt rating at AA− as well as its stable outlook, on Friday, November 29, while the government multiplies the commitments to try to escape a motion of censure, which could intervene next week in the Social Security budget and plunge, according to the executive, France into a crisis ” storm “ economic and financial.
“Despite political uncertainty, we expect France to comply – belatedly – with the European budget framework and gradually consolidate its public finances in the medium term”the US agency stated in a press release.
In May, the US rating agency downgraded the French rating by one level, from AA to AA−, with a stable outlook, reducing the risks of a further downgrade in the immediate future. In October, Moody’s and Fitch maintained the French rating with a negative outlook.
After a drop in pensions or employer contributions, the government agreed not to increase the electricity tax beyond its pre-tariff shield level, to satisfy the National Rally (RN), which is threatening to join forces with the left to overthrow him.
For François Villeroy de Galhau, the budget project is “in the right direction”
Despite these “adjustments” carried out in the budget project, which initially foreseen an effort of 60 billion euros in 2025, assured the Prime Minister “Everything to stay around 5%” public deficit in relation to gross domestic product (GDP), after a projected decline to 6.1% in 2024. France would once again be below the European ceiling of 3% in 2029, a trajectory validated by Brussels.
And politically, the risk persists. On Friday, RN leader Marine Le Pen appeared unwilling to give up censuring the government next week, accusing it of making concessions. “not financed by structural economies” and of “precipitate the financial crisis”.
The governor of the Bank of France, François Villeroy de Galhau, warned on Friday that “regain control” of public finances was the responsibility of “national interest” so as not to increase the cost of debt. The government’s draft budget “in the right direction”according to him.
This political uncertainty, which has continued since the dissolution of the National Assembly in June, is roiling the markets. the gap (spread) between French ten-year sovereign rates and those of Germany, considered a safe haven in Europe, reached a maximum since 2012 at the beginning of the week: France’s borrowing rate is higher than that of Spain and Portugal, and for the first time. On Wednesday it briefly surpassed that of Greece, a country that had been on the brink of bankruptcy.
