Baptiste Morin with AFP / Photo credit: THOMAS COEX / AFP 06:51, June 02, 2023

After the poor rating of Fitch inflicted in April, the France is already recalled to the table with the assessment Friday of the rating agency S&P Global on the French economy, which could lead as for that of its sister to a downgrade in the form of a snub for the government.

The pressure is mounting as the deadline approaches, taken very seriously by a government anxious to display a solid economic policy and serious fiscal policy. The US agency Standard and Poor's will give its verdict on the rating of the France, which could fall from AA to AA-. In April, Moody's confirmed its AA2 rating with a stable outlook while Fitch downgraded its rating. But how do these rating agencies work?

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What is a rating agency?

Rating agencies are private companies. They assess for investors the creditworthiness most often of other companies, but also of local authorities and states. Agencies appreciate the ability of these organizations to repay the debts they have incurred. These agencies assign a grade from A to D, sometimes accompanied by a plus or minus sign. If it's a triple-A, that's fine. If it is a triple C, there is a risk of non-repayment. A D is synonymous with bankruptcy.

What does this mean for France?

The France is rated "AA" by S&P Global, formerly Standard and Poor's, one of the three most influential US rating agencies, along with Fitch and Moody's. It could downgrade the rating Friday night by a notch, to "AA-" but also publish nothing, which would then represent a maintenance of the French rating unchanged.

Friday's downgrade of the rating could have the effect of increasing French loan interest from investors, the latter demanding more to agree to lend to the France. However, interest rates on 10-year bonds are already at the highest levels in eleven years due to rate hikes by the European Central Bank, which is fighting inflation and mechanically raising borrowing rates in euro zone states.

The France downgrade only twice since 1975

S&P has rated the France since 1975 and has downgraded it only twice. It is also the first to have withdrawn from France its emblematic "triple A" in 2011, the best possible rating and symbol of excellent management, which a small circle still benefits from the three agencies, like Germany, the Netherlands and Australia.