PARIS (AFP) – Two major ratings agencies left their assessment of France’s huge debt pile unchanged on Friday, but cast doubt on the government’s debt reduction target.
Moody’s maintained France’s sovereign rating at “Aa2” with a stable outlook. Fitch, which downgraded its rating for France last year, left it unchanged at “AA-” with a stable outlook.
France’s public deficit widened to 5.5 per cent of gross domestic product (GDP) in 2023, overshooting the government’s 4.9 per cent target. And with the debt stock equal to 110.6 per cent of GDP, France has the third highest debt ratio in the European Union after Greece and Italy.
The government has set a target of bringing debt below three per cent of GDP by 2027. But both agencies cast doubts.
Moody’s said it was “unlikely” that France will hit its deficit target of 2.9 per cent in 2027. “Progress in sustainably reducing the budget deficit and government debt is limited,” it said in a commentary.
The agency predicted that debt could reach “almost 115 per cent of GDP by 2027”.
“France’s interest burden will gradually rise and could double over the next decade if the debt level does not materially decline,” it added.
Fitch said “it will be difficult to achieve this target as deficit narrowing measures remain largely unspecified, France has only met the three per cent deficit criterion in four out of the last 20 years.”
French Finance Minister Bruno Le Maire said in a statement that the agencies’ decisions should “encourage us to redouble our determination to restore our public finances and meet the objective” of getting debt below three per cent in 2027.
“We will keep to our strategy based on growth and full employment, structural reforms and the reduction of public spending,” he added.
France lost its triple-A rating in 2012, though double-A still implies only a minimal chance of a default.
“France’s ratings are supported by its wealthy and diversified economy with supportive demographic trends,” Moody’s said.
“Structural reforms have started to address credit challenges such as high unemployment and weakening competitiveness.”
