France’s credit rating downgraded, with debt forecast to keep rising amid political turmoil | France
Fitch Agency, President Emmanuel Macron’s tense public finances on how to organize political instability and disagreements on how to fought France’s credit rating reduced.
The US rating agency, one of the best global institutions that measured the financial strength of the sovereign borrowers, has dropped France because of the ability to repay France from “AA” to “A+”, which broke records in a large credit rating agency.
He also said that France’s Mount Debt will continue to rise until 2027 unless an emergency action was taken and that he attributed the deduction to the lack of a “open horizon for debt stability in the following years”.
Movement comes four days after Francois Bayrou resigned as a prime minister after the Parliament lost a confidence vote in his attempt to accept a boring budget. He sought great expenditure cuts in the budget to reduce the French deficit and debt.
Reacting to the announcement, Bayrou said that France is a country that condemns (and) to pay the price in X.
The decline will probably make the task of the new Prime Minister Sebastien Lecornu, who presides a minority government, and will prepare a budget for the next year.
Fitch said in a statement: “The government’s defeat in the game shows the increasing disintegration and polarization of domestic politics.
“This instability weakens the capacity of the political system to provide significant financial consolidation,” he added, which is not likely to cut the financial deficit until 2029 to 3% of GDP.
Economy Minister Eric Lombard said that he noted Fitch’s movement and that Lecornu was progressing with MPs to accept a budget and regain public finances.
Decrease in rating usually increases a government’s demand for the purchasing of a government’s dominant bonds.
Some financial experts have argued that the debt market has already priced at an expected decline for France, but the movement gives more results than recent decreases, because it could bring peers to the forefront to follow the case and have potentially force French bonds of investors connected to the rating thresholds.
On Tuesday, the return of 10 -year French state bonds, known as return, rose to 3.47%near Italy, one of the worst performances in the euro region.
Increased returns will turn into higher costs to serve the debt of France, which Bayrou has already warned that it is at a “unbearable” level.
Since there is no general majority of Macron’s allies in Parliament, Lecornu’s work will probably have to make compromises that can weaken any effort to reduce expenditures and increase taxes.
The budget deficit of France represented 5.8% of gross domestic product (GDP) last year and 113% of GDP of GDP.
This is compared with 3% for open and 60% euro zone ceilings for debt.
“Fitch increases from 113.2% to 121% of GDP in 2027 in 2027 without a clear horizon for debt stabilization in the following years.” He said.
“The increasing public debt of France limits the capacity to respond to new shocks without further deterioration of public finances.”
France is still aimed at economic growth this year. Insee National Statistics Office said on Thursday that GDP is expected to grow by 0.8% for 2025, 0.1 points more than the prediction of the previous government.
The rival agency S+P Global will update its sovereign grade for France in November.
With Agent France-Presse and Reuters
