There was a time, not so long ago, when the risk of a deterioration in the sovereign rating of France by the rating agencies was seen as a humiliation to the financial consequences as they could hasten the bankruptcy of France .dropoff window Times have changed.
Now, since, in summer 2012, Mario Draghi, President of the European Central Bank (ECB) announced that the ECB would, what it may cost to prevent a member of the euro zone is in default, the impact of a warning shot from the rating agencies on the financing of the French economy is zero. Almost.
In fact, France continues to fund cheap. The French borrowing rates to ten years he has not hit a new low on Friday session at 0.890% on the secondary bond market where previously issued debt is exchanged after Fitch has decided to degrade the sovereign rating of France from AA + to AA? Monday, Agence France Trésor (AFT) announced that France had borrowed 6.738 billion euros of short-term market at rates although slightly higher but still negative.
Goals that are not required
The message of the rating agency is nevertheless enlightening because it returns the point by point to the weaknesses of the French economy and comment on the action of the executive.
Principal and first point, the revision of the public deficit from 4.4% to 4.1% of GDP in 2015, announced last week by Michel Sapin, Minister of Finance, does not satisfy all the rating agency .dropoff window Initially, the government had set a goal of lowering below 3% of GDP the level of public deficit. A goal that, sorry Fitch, has been shifted to 2017, due to the lack of tone of the French economy since 2012. “ These changes in budgetary objectives weaken fiscal credibility of France ” advance the agency, noting 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 “.
The government would be too optimistic according to Fitch
Problem, despite the depreciation of the euro against the dollar and net crude prices decline and certain raw materials should enjoy French companies, the prospects are not reassuring estimated Fitch, weighing on fiscal consolidation and stabilization of the debt ratio, which irritated Fitch, could eventually reach almost 100% of GDP.
“ The French economy is expected to grow less than the average of countries in the euro zone for the first time in four years ,” said Fitch in a statement. The agency now expects an increase of 0.4% of GDP this year, as the government and an increase of 0.8% next year when Bercy expects growth of 1%. Until there is little, Fitch counting on growth of 0.8% and 1.2% of GDP in 2014 and 2015. The surprise rebound in activity in the third quarter did not change his mind .
In 2016 and 2017, the recovery will be there
And then what? The euphoria! The government is optimistic that this is an increase of 1.7% in 2016 and 1.9% in 2017. The economists at Credit Agricole and Bank of America Merrill Lynch are less optimistic. According to their calculations, GDP will grow by 1.2% in 2016. In turn, Fitch does not venture to make prognosis, simply noting that the unemployment rate will continue to be around 10.5% of the active population, a level mechanical weighing on activity and on public finances.
When the government puts forward its reforms, that meets the rating agency? In line with the OECD arguments, Fitch believes that their effects will certainly palpable on growth but they also will not be visible quickly as desired by the government. Positive, “ French debt is among the safest and most liquid in the world with a debt load contained ” notes Fitch.
The agency Fitch n is not the only one to have downgraded the rating of France recently. On October 10, Standard and Poor’s, which had been the first to deprive France of its ‘triple A’ in January 2012, had also issued a warning to France, passing from “stable” to “negative” perspective evolution of the note of the French debt maintained at ‘AA’, the third row of the rating scale. Only Moody’s continues to pay the second highest possible rating to the quality of the French debt
The French government sweeping criticism
Well aware. – And very happy – to the current weakness of the impact of this warning by Fitch, the government can afford to play the proud arm. Clearly, it is accountable, it’s citizens and Brussels.
“ The rating agencies do their job, we do our own. We have a cap, we the guard. We set our goals in terms of deficit reduction. We even saw them to improve outcomes, either in 2015, 2016 and 2017. (…) The rating agencies do their work, we ours , “said Stéphane Le Foll on Saturday, the spokesman of the government.
Monday, Manuel Valls was on the same wavelength. “ On the financial issue, we take our choices: reduce deficits and public spending, but at the pace required and endurable ,” argued the head of government on the sidelines of a trip to Dijon <. / p>
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