Source: AFP
Two major rating agencies left their rating on France’s massive debt unchanged on Friday, but cast doubt on the government’s debt reduction target.
Moody’s maintained France’s rating at “Aa2” with a stable outlook. Fitch, which downgraded France last year, left it unchanged at “AA-” with a stable outlook.
France’s public deficit widened to 5.5% of GDP in 2023, exceeding the government’s target of 4.9%. And with the stock of debt equal to 110.6 percent of GDP, France has the third highest debt ratio in the European Union after Greece and Italy.
The government has set a target of reducing debt below 3.0 percent of GDP by 2027. But both agencies dispute that.
Moody’s said it was “unlikely” that France would meet its 2.9 percent deficit target in 2027. “Progress in sustainably reducing the fiscal deficit and public debt is limited,” it said in a commentary.
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The agency predicted that debt could reach “nearly 115 percent of GDP by 2027.”
“France’s interest burden will rise gradually and could double over the next decade if debt levels do not fall substantially,” it added.
Fitch said “this target will be difficult to achieve as deficit containment measures remain largely undefined, France has met the 3% deficit benchmark in only four of the past 20 years”.
French Finance Minister Bruno Le Maire said in a statement that the agencies’ decisions should “encourage us to redouble our determination to restore our public finances and achieve the goal” of bringing debt below 3.0% in 2027.
“We will stick to our strategy based on growth and full employment, structural reforms and reducing public spending,” he added.
France lost its triple-A rating in 2012, although double-A still carries only a minimal chance of default.
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“France’s ratings are supported by its rich and diversified economy with supportive demographic trends,” Moody’s said.
“Structural reforms have begun to address credit challenges such as high unemployment and weakening competitiveness.”
Source: AFP