Debt: Fitch downgrades France rating by one notch to "AA-"

The Fitch Ratings logo can be seen in their offices in London's Canary Wharf financial district. © Krause/File Photo

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The Fitch agency on Friday lowered the French rating by a notch, citing the strong social tensions at work around the pension reform.

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This is a blow for the French economy, but also for the government. The international financial rating agency Fitch downgraded the rating of the France by one notch on Friday, April 28. In question, "the political impasse and social movements (sometimes violent) that constitute a risk for Macron's reform program," wrote the rating agency in a statement that announced the downgrading of the French rating by one notch, to "AA-", against "AA" previously.

Six weeks ago, the government definitively adopted its pension reform project providing for a postponement of the legal age from 62 to 64 years, thanks to the support of Article 49-3 of the Constitution which allows a text to pass without a vote in Parliament. This decision led to a sharp hardening of the protest, and several days of violent demonstrations throughout the country, recalling the episode of the yellow vests from 2018.

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This decision has led to protests and strikes across the country and will likely strengthen radical and anti-establishment forces. ", continues Fitch, which had attached a negative outlook to its previous rating, i.e. the risk of a downgrade. The current deadlock could also "create pressure for a more expansionary fiscal policy or a reversal of previous reforms," says Fitch, which this time accompanied its "AA-" rating with a stable outlook.

Bruno Le Maire regrets

Economy and Finance Minister Bruno Le Maire regretted in a statement the "pessimistic assessment" of Fitch, believing that the rating agency "underestimates the consequences of reforms", including that of pensions. Bercy recalls in a statement "the total determination" of the government "to restore in the next four years the public accounts" in order to reduce the deficit and debt. The government hoped that the enactment of the pension reform would reassure markets about the country's financial situation. In its conclusions published on Friday, Fitch cited "significant budget deficits and modest progress" in reducing them.

After reaching 4.7% in 2022, the French public deficit is expected to rise slightly this year to 4.9% before gradually declining from 2024, anticipates the government in its stability program published in recent days. Fitch anticipates a deficit of 5% this year and 4.7% next year.

Debt reduction should experience a boost according to the government, with a debt representing 108.3% of GDP in 2027, 4 points less than previously envisaged, but still far from the European target of 60%. It stood at 111.6% of GDP at the end of 2022.

Fitch also expects growth to be less robust than expected in its previous November forecast. This year it would be 0.8% against 1.1% previously anticipated, and 1.3% in 2024 against 1.9% imagined during the last forecasts. The government is counting on 1% growththis year.

(

With AFP)

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