The French Minister of Economy and Finance, Bruno Le Maire, reacted to the recent downgrade of France’s credit rating by Standard & Poor’s, which now stands at AA-. This is the first time since 2013 that France’s credit rating has been downgraded, following a previous warning in 2022 post the Covid-19 crisis. Despite the downgrade, French officials maintain that the country still has a high-quality credit rating, comparable to countries like the Czech Republic and Estonia. The government claims that French debt is still in high demand in the market, and that France retains one of the best credit ratings in the world.
Standard & Poor’s decision to downgrade France’s credit rating was based on several factors, including a higher-than-expected public deficit of 5.5% of GDP in 2023. The agency also doubts that the government will be able to reduce the deficit to below 3% by the end of the current term. Additionally, France’s debt-to-GDP ratio is projected to continue increasing until 2027. S&P notes that France now has the third-highest public debt ratio in the Eurozone, behind Greece and Italy, and expects the interest burden on French debt to increase to 5% of GDP by 2027. The agency also mentions political fragmentation in France as a contributing factor to its decision, as it limits the ability of the government to take strong action.
Opposition leaders were quick to criticize the government’s handling of public finances in light of the credit rating downgrade. Marine Le Pen, leader of the Rassemblement national (RN) party, accused the government of incompetence and arrogance, resulting in record levels of taxes, deficits, and debt. Véronique Louwagie, a member of Les Républicains (LR) party, called for significant cuts in public spending and debt reduction, while warning that the government may have to make tough decisions to address the situation. Eric Coquerel, from the leftist “La France Insoumise” party, expressed concerns that the downgrade may lead to further budget cuts, particular in areas such as tax breaks for the wealthy.
As the European elections approach, the credit rating downgrade adds to the challenges faced by the French government. While the downgrade is seen as a significant setback, French officials maintain that the country’s credit rating still remains strong. However, there are growing concerns about the implications of the downgrade on the economy and public finances. It is clear that France will need to take concrete actions to address the issues raised by the credit rating agencies in order to maintain stability and credibility in the international financial markets.
