(Bloomberg) – The outlook for France’s credit rating has been lowered from stable to negative by Scope Ratings, raising questions about President Emmanuel Macron’s efforts to boost growth and reduce the debt burden bloated by crisis.
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The Europe-based rating company said it changed its outlook to its AA rating due to weakening public finances and risks from the implementation of the economic reform program.
The change comes after Fitch Ratings downgraded France from AA- to AA last month, also flagging high public debt and risks that political stalemate after protests over pension reform could hamper future economic reviews.
The rating actions highlight the challenges France faces in reducing a budget deficit that swelled during the Covid pandemic and only slowly declined as the government spent huge sums to limit prices Energy.
Although Scope is not a major rating agency, it is recognized by the European Securities and Markets Authority and has applied for recognition in the European Central Bank’s credit assessment framework.
Standard & Poor’s could also take rating action on France within a week, according to its schedule.
The French government has presented a long-term plan to bring the deficit under control and put the debt on a downward path that relies on stimulating economic growth, reducing fiscal support to mitigate high energy prices and containing increasing spending below inflation.
But the country’s public finance watchdog, the HCFP, has warned that the plans are based on growth estimates that “look optimistic” and inflation forecasts that look somewhat understated.
Scope said it could downgrade France if the public debt ratio rises steadily due to inadequate fiscal consolidation, or if growth prospects deteriorate significantly.
France faces strong spending pressures and a growing interest rate burden, while it also has a “patchy record on fiscal consolidation”, Scope said.
He also said the Macron government’s lack of a majority in the National Assembly and social unrest increased the risks that economic revisions would be postponed or watered down.
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