And one notch down for France’s debt: this is what the rating agency Scope Ratings revealed, namely that it had lowered France’s rating from AA- to A+, highlighting in particular the state of public finances and a political context deemed difficult.
In the same time, the agency improved its outlook, moving from “negative” to “stable”.
To justify this decision, Scope Ratings cites a “persistent deterioration of budgetary prospects”.
The agency points in particular to “an increase in public debt, still-high budget deficits and limited progress on structural reforms”.
In its analysis, the agency also stresses the growing weight of debt interest payments.
It estimates that the combination of persistent deficits, rising public debt and higher interest charges weighs on France’s financial outlook.
A downgrade, but an outlook now “stable”
The change in outlook may seem paradoxical at first glance. France’s rating falls, but the outlook attached to that rating improves. A “stable” outlook means that Scope does not foresee, at this stage, any near-term change to the rating. It contrasts with the “negative” outlook that had accompanied the AA- rating until now.
The decision comes as French bond markets are already under pressure. The yield on France’s 10-year borrowing exceeded 4.5% by mid-September, while the yield spread with Germany surpassed 100 basis points, a first since the eurozone debt crisis of 2012, according to Reuters.
This announcement comes the day after Prime Minister Sébastien Lecornu outlined the main lines of the 2027 budget.
The head of government announced a budget effort of around 54 billion euros and set a public deficit target at 5% of GDP. He advocates a substantial reduction in public spending while excluding an austerity policy, according to the details presented in his interview with Le Figaro.
The context is particularly sensitive for the administration, since the 2027 budget will be the last of Emmanuel Macron’s presidency and must be adopted in an National Assembly without an absolute majority.
