Bad news for France: the rating agency Standard & Poor's downgrades the country's rating from AA to AA-

31 May 2024 / Jerome Goulon

Bad news for the government! While Fitch and Moody's had maintained France's sovereign rating in April, S&P Global Ratings decided, this Friday, May 31, to revise it downwards, going from AA to AA-.

The government's efforts to reduce public deficits have clearly not convinced the American agency. During its last review in December, S&P had already warned that France risked a downgrade if it did not reduce its deficits quickly enough to reduce debt, or if loan interest exceeded 5% of public administration revenues.

The recent unexpected excess of the public deficit for 2023, announced by the government after the last S&P review, reaching 5,5% of GDP instead of the 4,9% forecast, obviously weighed in the balance. S&P has been evaluating France since 1975 and had only lowered its rating twice: in 2011, from AAA to AA+, then the following year, to AA.

What are the consequences of this degradation? The main risk is a loss of investor confidence and an increase in the French debt burden (the sums paid for debt interest), which, according to the government, would reach 72,3 billion euros in 2027 (more than the National Education budget), compared to 46,3 billion in 2022, mainly due to increases in key rates from the European Central Bank (ECB). For the moment, this loss of confidence is not yet visible: the difference in borrowing rates between France and Germany, a country considered the safest in Europe, is even lower than at the start of year, before the announcement of the 2023 budget overrun.

Despite this announcement, the Minister of the Economy, Bruno Le Maire, reaffirmed his commitment to bringing the public deficit below 3% by 2027. “Our strategy remains the same: reindustrialize, achieve full employment and follow our trajectory to return below the 3% deficit in 2027,” he declared to Le Parisien. “The main reason for this deterioration is that we saved the French economy,” he added.