rating agencies put pressure on France

After Moody’s, it is the Fitch rating agency which considers that the French budget reduction objectives are “increasingly out of reach”. This is a bad signal for the government.



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The offices of the Fitch rating agency in New York, United States, August 2023. (JUSTIN LANE / EPA / AFP)

This statement from the American rating agency Fitch, Tuesday April 2, 2024, sounds like a warning. Fitch, which had already lowered France’s sovereign rating from AA to AA- in April 2023, is quite pessimistic about the government’s ability to restore its public accounts. Certainly, it recognizes the effort that the government is making to reduce the country’s debt level a little, but Fitch emphasizes “a delicate domestic political situation.

In fact, this alert from Fitch is all the more worrying as it follows another comment, which also looks like a yellow card. That of the Moody’s agency, this time, which last week qualified “unlikely”the government’s scenarios to reduce the public deficit below 3% by 2027, while the deficit is at 5.5% in 2024. Both Fitch and Moody’s will update their financial rating of France at the end of the month, on April 26.

If the rating is downgraded, it will not mean that France is bankrupt, but that it is losing credibility and that it will be less solvent in the eyes of investors who lend it money. So, if they buy French debt, the risk will be estimated higher of not being repaid. Which is not very good, because of course investors can continue to lend money, but more expensively, with higher interest rates. As a result, this will then increase our debt burden, that is to say the weight of our interests. And when we have more than 3,000 billion euros in debt, it is felt very quickly on the budget.

Republicans launch a commission of inquiry into the causes of the deficit

THE government is feverish, obviously. He is looking for money, cutting spending, looking at how to tighten unemployment insurance rules, scrutinizing health reimbursements, considering putting more waiting days, all not very popular measures. Of course, he rules out tax increases, but Gabriel Attal does not close all the doors. On Tuesday, the Prime Minister announced the launch of a mission “on the taxation of annuities”, without specifying too much. Will it be a question of taxing big owners or the savings of the French? Matignon wants proposals by June.

Economically, but also politically, the government finds itself weakened and on the defensive, particularly in the face of opposition. Without delay, the Republicans also announced the creation of a commission of inquiry to understand the reasons for the very strong growth in debt under the presidency of Emmanuel Macron and the consequences on the purchasing power of the French.

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