PARIS: Ratings agency Standard & Poor’s downgraded France’s credit score on Friday citing a deterioration in the country’s budgetary position, a blow to Emmanuel Macr­on’s government days bef­ore EU parliamentary elections.

In a statement, the American credit assessor justified its decision to drop France’s long-term sovereign debt rating from “AA” to “AA-” on concerns over lower-than-expected growth.

It warned that “political fragmentation” would make it difficult for the government to implement planned reforms to balance public finances and forecast the budget deficit would remain above the targeted three percent of GDP in 2027.

The S&P’s first downgrade of France since 2013 puts the EU’s second-largest economy on par with the Czech Republic and Estonia but above Spain and Italy.

The announcement will sting for Macron, who has staked a reputation as an economic reformer capable of restoring France’s accounts after low growth and high spending.

The risk of a ratings downgrade had been looming for several quarters, with the previous “AA” assessment given a “negative outlook”.

The surprise slippage in the public deficit for 2023 to 5.5pc of Gross Domestic Product (GDP) instead of the expected 4.9 percent did not play in the government’s favour.

France’s general government debt will increa­se to about 112pc of GDP by 2027, up from around 109pc in 2023, “contrary to our previous expe­ctations”, the agency added.

Responding to the downgrade decision, Economy Minister Bruno Le Maire reaffirmed the government’s commitment to slashing the public deficit to below three percent by 2027.

Published in Dawn, June 2nd, 2024