This is the second serious alert from Fitch addressed to France in less than three months. The rating agency, which in October placed France’s rating under a negative outlook, warned on Friday of the consequences for the budget policy of the fall of the government of Michel Barnier.
What you do “highlights the extent to which the highly fragmented French political landscape can paralyze the implementation of fiscal policy”.advises Fitch in a press release.
Fitch, however, maintains France’s rating at AA-. In October, he gave this rating a negative outlook, signaling that he was considering lowering it in the medium term.
“The country’s fiscal parameters, which are weaker than those of its peers (…), and its increased fiscal policy risks have been important factors” of this review, reminds the rating agency.
The study of the finance project (PLF) for 2025 is frozen after the censure voted on Wednesday by the deputies against the government of Michel Barnier, which led him to resign.
The worst performance of the 27 with Romania
The President of the Republic Emmanuel Macron announced that the future government would present a special law. before mid-December in Parliament »counting this rare but already used legislative tool, to allow the state apparatus to function in the absence of promulgation of a budget on January 1.
But Fitch believes that parties risk“exploit the process for political purposes.”
In addition, “The fragmentation of the National Assembly makes it difficult to find a compromise on the consolidation of the budget (…). It is therefore very unlikely that France will reach the deficit goal of 5% of GDP initially presented by (Michel ) Barnier. Fitch notes again.
“The collapse of the government also threatens France’s medium-term consolidation plan and compliance with EU budget rules”is specified.
With a deficit this year that should exceed 6% of GDP, France shows the worst performance of the Twenty-Seven with the exception of Romania, far from the 3% ceiling authorized by the EU.
“Despite the political crisis, France does not face major refinancing problems on the international bond markets”, but “persistently higher borrowing costs will only exacerbate the problems of fiscal consolidation”. Fitch warned again.
Fitch expects public debt to rise to 118.5% of GDP by 2028, and has reduced its growth projection for 2025 to 0.9% from 1.2% previously.
