S&P maintains French debt rating at "" amid budget fight
Recasts with new details throughout
By Gabriel Stargardter
PARIS, Nov 29 (Reuters) - Standard & Poor's on Friday held its rating on France's long-term sovereign debt steady, in a relief for the government which is fighting to stave off a no confidence vote as it struggles to pass the 2025 budget bill.
Standard & Poor's maintained its rating of French debt at "AA-". It also kept its outlook at stable. The agency had cut its rating from "AA" in May, citing ballooning deficits, while also revising France's outlook to stable from negative.
"We could lower the ratings on France if the government is unable to reduce its large budget deficits or economic growth falls below our projections over a protracted period," the agency said in a statement. "Nevertheless, our base-case expectation is that French authorities will move ahead with budgetary consolidation amounting to just under 1% of GDP next year as part of a medium-term plan to moderate high budgetary deficits."
S&P's decision provides some breathing space for French Prime Minister Michel Barnier as he fights for his government's political survival. Far-right and leftist opponents have refused to back his2025 budget bill, leaving himwith few options for getting the legislation approved.
"By maintaining France's rating, Standard and Poor's demonstrates the credit granted to the Government to reduce the deficit and straighten out our public finances," Finance Minister Antoine Armand said in a statement. "The agency nevertheless underlines the risk associated with political uncertainty which would call into question this trajectory."
Barnier's government could collapse as soon as next week if he is obliged to use an aggressive constitutional measure to ram the legislation through parliament, triggering a no-confidence motion that the far-right National Rally (RN) and the left are likely touse topple his administration.
On Thursday, Barnier dropped plans to raise electricity taxes in his budget bill, bowing to far-right threats to bring the government down unless he eased the burden on the working classes. The RN cheered the move as a victory, but warned the concession was insufficient to avoid a no-confidence vote.
Such concessions may buy time, but will be unlikely to please ratings agencies worried by France's strained public deficit. In the 2025 budget bill, the government had sought to squeeze 60 billion euros ($62.85 billion) in savings through tax increases and spending cuts to reduce the deficit to 5% of economic output next year from over 6% this year.
However, earlier this week, before the electricity tax hike climb-down, Budget Minister Laurent Saint-Martin acknowledged that the budget deficit might be slightly higher than the 5% of output originally foreseen.
Last month, Moody's saved French policymakers' blushes by maintaining its rating on French debt at Aa2, although it did revise France's outlook to "negative" from "stable" due to concerns about the ever-widening budget deficit.
Reporting by Gabriel Stargardter; Editing by Diane Craft
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
