France Gets Another Debt Warning as Scope Downgrades

Date: 19 October 2024 - 21:51

News ID: ۱۳۲۶۰۴

LONDON (Bloomberg) - France was downgraded by Scope Ratings in another warning on the state of the country’s finances and the political impediments to containing a ballooning budget deficit.
The Europe-based credit rating firm cut France to AA- from AA, with a stable outlook, bringing it to the same notch as Belgium and the Czech Republic, three levels below a top rating.
“Sustained deterioration of public finances and challenging political outlook drive the downgrade,” Scope said in a statement Friday.
The rebuke comes a week after Fitch slapped a negative outlook on its assessment of France’s creditworthiness. The country will face another test a week from now, when Moody’s has scheduled an update of its assessment. S&P, which downgraded France earlier this year, is due Nov. 29.
France’s finances are under intense scrutiny as President Emmanuel Macron’s plans to pare back the budget deficit have repeatedly slipped off course. Adding further uncertainty, his decision to call snap elections in June has clouded the outlook for policy in France, leaving it with a minority government that could easily be toppled by parliament.
Investors reacted by selling French assets, driving up the premium the country pays on its 10-year debt over Germany to more than 80 basis points, from below 50 earlier this year. That premium has ebbed to 71 basis points in recent days as the prospect of faster interest-rate cuts helps debt-laden countries like France and Italy outperform.
In an effort to steady the situation, Prime Minister Michel Barnier’s government presented a 2025 budget plan last week with €60 billion ($65.6 billion) of spending cuts and tax increases to bring the deficit to 5% of economic output from 6.1% this year. That’s a first step toward getting the gap within the EU’s 3% limit by 2029 — something the previous government had pledged to do by 2027.
Scope said it expects next year’s budget deficit to narrow to only 5.2% as the fragmented parliament will likely amend some of the measures planned by the government.