Ihe worst is never certain. By deciding on Friday, June 2, to keep France’s credit rating unchanged at the AA level, the American rating agency Standard and Poor’s (S&P) took the opposite view of Fitch, which had, five weeks ago, downgraded the country’s assessment up a notch. The most notable consequence is that the Treasury will be able to continue to borrow without suffering short-term increases in the cost of credit, the AA rating signifying a strong ability to repay its debts.
The Minister of the Economy, Bruno Le Maire, can boast of having carried out an effective campaign of persuasion in recent weeks. Contrary to Fitch, which was worried, among other things, about the deterioration of the social climate linked to the pension reform, S&P sees in the extension of the retirement age adopted at the end of April and in the scheduled end of energy aid elements likely to make the French budgetary trajectory less uncertain.
The government is not left with it. By maintaining its “negative” outlook, the S&P agency highlights the uncertainties, including political ones, which weigh on Bercy’s commitment to restore the public accounts in the next four years. She emphasizes in particular “the absence of an absolute majority in the French Parliament” as well as “political fragmentation” of the country, which is therefore clearly under surveillance.
The differences in appreciation between Fitch and S&P will not fail to fuel criticism from those who accuse the financial rating agencies of wanting to steer budgetary policies instead of governments. The facts, however, are stubborn: with a debt of 3,000 billion euros, or 111.6% of GDP in 2022, France has spent more than other countries to absorb recent health, energy and geopolitical shocks. Above all, it will not return before 2027 to the outline of the stability and growth pact of the European Union in terms of deficit, well after all the other countries.
This singularity weakens it all the more because it is not new. Already, at the end of 2005, the Pébereau report had warned of the drift in our finances. Eighteen deficit exercises later, awareness remains very hazy, if not non-existent.
The end of the money was free
The question of budgetary seriousness was carefully avoided during the presidential campaign, which turned into a Lépine competition for public spending. The recent sequence on the pension reform has not put the debt back at the center of the debates either: whatever the legitimate criticisms that may have been formulated by the oppositions and the unions, the question of the financing of the system was immediately evacuated, as if it were secondary or constituted a non-subject.
There have been many voices in recent years to say that debt was not a problem since the money was free. The surge of inflation put an end to this illusion. Going into debt will cost more and more and amputate more and more budgetary leeway. By 2027, the annual debt burden should reach 70 billion euros and represent the main item of State expenditure.
If it wants to be able to invest in ecological transition, education or health, the government will have to curb the operating expenses of the State and local communities, just as the current dogmas on taxation will have to be re-examined. The no-charge warning from the rating agencies marks a change of era.