The downgrading of the French sovereign rating “tarnishes the balance sheet” of Emmanuel Macron
“It’s a hard blow” for Emmanuel Macron, ensures the Financial Times. “A cold shower”, confirmed Politico. The decision taken by Standard & Poor’s (S&P), Friday May 31, to downgrade the French sovereign rating undermines “the efforts undertaken by the government to put public finances in order”continues the media based in Brussels.
While the Moody’s and Fitch agencies left their ratings unchanged in April, S&P lowered its rating from the third (AA) to the fourth level, or AA-. Concretely, its financial analysts anticipate an increase in public debt as a proportion of GDP and do not believe that the public deficit will return below 3% in 2027, as planned by the government. “Paris had to revise its initial objective of 4.4% this year for a more realistic rate of 5.1%”noted Politico.
Political fallout
“The financial consequences of this decision should be quite limited, decipher it Financial Times, like the latest deteriorations that occurred in the aftermath of the eurozone crisis a decade ago.” In other words, if France symbolically drops out of a group of countries made up of the United Kingdom and Belgium, loans should not cost more.
Politically, on the other hand, “the fallout could be significant” for Emmanuel Macron, warns the London economic daily, one week before European elections “which already portend a large defeat for the centrist alliance” of the head of state.
“The situation demonstrates the limits of his strategy since 2017, namely reducing taxes for companies and implementing pro-business reforms in the hope that this could lead to a sufficient increase in growth to finance the generous social model French.”
However, adds the British newspaper with salmon pages, despite lower tax revenues “the government continued to spend heavily on its public services, as well as on exceptional measures taken in response to the pandemic and the energy crisis”. Result, deplores the Financial Times, “the deficit has widened and the debt has soared”.
Cold meats and wine
For economic news media Bloomberg, in the USA, “the deterioration of the French rating”a first at S&P since 2013, “tarnishes Emmanuel Macron’s record in terms of debt control” and illustrates the current difficulties of the government.
For his part, the Minister of the Economy defended the executive’s approach, arguing that the spending had helped save the French economy after Covid-19. Bruno Le Maire, who celebrated his seventh birthday on Thursday May 30 in Bercy with “charcuterie and wine”slide Politico, “now looking for savings everywhere, on the climate as well as on aid for apprentices”notes the Financial Times. The former member of the Les Républicains party has already announced 20 billion euros in cuts this year and the same amount could be cut from the budget in 2025. “After years of significant spending, summary Politico, France is tightening its belt.”
