Moody’s is now the only rating agency to continue to pay the second highest possible rating to the quality of the French debt (“AA1″). Two months after the warning to France by Standard and Poor’s passing to “negative” instead of “stable” the prospect of changing the note of the French debt (it remained at “AA”) the rating agency Fitch Ratings on Friday, downgraded the sovereign rating of France from “AA” to “AA”. A decision with a stable outlook, justified by the budgetary slippage in France and the “weak” prospects offered by the French economy. “The” rating agencies are doing their job, we do ours “responded Saturd ay the spokesman of the French government, Stéphane Le Foll.” We have a cap, you keep it. We set our goals in terms of deficit reduction. We even saw them to improve outcomes, either in 2015, 2016 and 2017, “said the spokesman, on his arrival at the extraordinary National Council (” parliament “) of the Socialist Party.
France notes
Earlier, in a statement, Michel Sapin, Minister of Finance, said “take note” of the decision of Fitch, while reaffirming “the quality of the signing of the French. “” The French state debt is among the safest and most liquid in the world, with a load of debt contained, as Fitch points out in its assessment. It has a strong and diversified investor base. This investor confidence feeds on a coherent economic strategy, the government intends to continue with determination, “he added.
In fact, France continues to borrow at historically low interest rates in the bond market . The French borrowing rates to 10 years has hit this Friday a new session low at 0.890% on the secondary bond market where the exchange previously issued debt.
In a note released Friday morning, economists generally believed that the Company’s market impact of a potential deterioration “should be limited.”
French growth below average in the euro area
Fitch believes that the weakness of the French economy threatens the prospects of both fiscal consolidation and stabilization of the public debt ratio.
“L French economy is expected to grow less than the average of countries in the euro zone for the first time in four years, “said the agency.
Thursday, Paris has yet announced a revision to the down its forecast deficit, saying now anticipate a total representing 4.1% of gross domestic product (GDP) in late 2015 (against 4.3% in its previous forecast), 3.6% in late 2016 (against 3.8 %) and 2.7% end of 2017 (against 2.8%).
Fiscal Credibility
Fitch said that “this will not be enough to change (its) projections on dynamics of public debt of France. ” The agency estimates as well as 4.1% of GDP, the deficit for 2015, “shows no improvement over the 2013″. The government also plans a deficit of 4.4% for 2014 instead of 3.8% forecast in April. In recent deviations in budgetary objectives (…) weaken fiscal credibility “of France, yet the agency says, adding that” this is the second time since late 2012 that the French government delays the goal of reaching the 3% deficit threshold “demanded by the European Union.
Brussels pressure on the budget
In late October, France had sought to defuse criticism from the European Commission its draft 2015 budget by announcing a further reduction of the public deficit. She earned a respite in late November in Brussels, which returned its verdict in the spring on the 2015 budget, but requiring more effort to improve public finances under face sanctions. Paris had already asked twice to postpone this commitment, under the presidency of Nicolas Sarkozy then under Francois Hollande.
The efforts are beginning to pay for the government
The French government ensures that “the policy is beginning to bear fruit.”
“The latest indicators confirm the growth prospects” of France ensures Finance Minister Michel Sapin. According Bercy, “companies benefit from the first effects of levies cuts, which will continue in the coming years.”
Defending his policy, the government said that the “economic context (East) difficult in Europe “but assures hold” on course with the implementation of planned savings, with continued reforms to strengthen growth and make them more competitive. It also highlights the Covenant of responsibility and solidarity the competitive employment tax credit, set up to revive the economy.
Insufficient reforms Fitch
Fitch however, the structural reform program of France ” does not appear sufficient to reverse the negative trends that affect the long-term growth and competitiveness. “The rating agency expects a French GDP growth of 0.4% in 2014 and 0.8% in 2015 , when “the depreciation of the euro and lower oil prices will support growth somewhat.”
“The pursuit of a period of poor economic performance, which began in 2012, increases uncertainty about growth prospects in the medium term, “added the rating agency. Earlier this month, Standard & amp; Poor’s lowered its economic growth forecast for France to 0.4% this year, 0.7% in 2015 and 1.2% in 2016, while the government forecasts growth of 0.4% this year to 1.0% next year and 1.7% in 2016.
The International Monetary Fund (IMF) on its side early October revised down its growth forecast for France 0 4% this year and 1.0% next year.
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