Political risks and government debt cause Fitch to downgrade France 2023

Friday, Fitch Ratings downgraded France’s debt rating from AA to AA-, citing a threat to President Emmanuel Macron’s economic reform policies posed by political gridlock and social movements. It further stated that the nation’s “fiscal metrics are weaker than peers.”

“Public finances, and particularly the high level of government debt, are a rating weakness,” noted the credit rating agency.

“Political stalemate and (sometimes violent) social movements pose a threat to Macron’s reform agenda and could create pressures for a more expansionary fiscal policy or a rollback of previous reforms,” the report continued.

Lower economic growth prospects and a decline in competitiveness could contribute to a further downgrade in ratings, the agency warned.

We shall proceed with reforms: French administration

After the ratings were released, Finance Minister Bruno Le Maire stated that the government would continue with structural reforms to restructure the economy.

“I believe that the circumstances render Fitch’s evaluation invalid. AFP quoted Le Maire as saying, “We are able to implement structural reforms and will continue to implement structural reforms for the country.”

“Do not question our unwavering resolve to restore the nation’s public finances. We have demonstrated the ability to pass reforms that fundamentally alter the French economic model.”

The assessment by Fitch comes less than a week after Macron suggested that his government may be in jeopardy as the far-right leader Marine Le Pen continues to gain ground.

“Marine Le Pen will come to power if we fail to address the country’s challenges and if we adopt a habit of lying or denying reality,” he said.

Macron lamented that he was insufficiently involved in promoting his incredibly unpopular pension reform measure to the public.

Macron told Le Parisien, “Perhaps my mistake was not being sufficiently present to give the reform substance and carry it out myself.”

The French court accepts the measure

The French court approved Macron’s pension reform proposal to raise the retirement age earlier this month. After nearly three months of protests across the country, the decision was ratified by the nine-member Constitutional Council.

The council believed that the government’s actions were constitutional and that the retirement age should be increased.

However, the protests against the reforms have not yet ended. The Parisians continue to take to the streets to demand that Macron restore the status quo, which, according to Fitch, may hinder the city’s economic development even further.

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