Credit rating agent Fitch reduced the creditworthiness of France on Friday from AA to A+. According to the agency, this has to do with political instability in the country and public finances.
Earlier this week, the French parliament sent Prime Minister François Bayrou away after a conflict over the budget. Bayrou had proposed reducing government spending by 44 billion euros through unpopular cuts.
“The fall of the government during a vote of trust shows the fragmentation and increasing polarization of domestic politics,” Fitch explains. “This instability hinders the possibilities of politics to implement radical budget consolidation.”
Fitch is one of the leading rating agencies. With the reduction, the French government may be more difficult to borrow money against favorable interest rates. Investors borrow money easier and at a lower interest rate to governments with a good rating to make sure they get their money back.
Due to the national debt, now risen to 114 percent of GDP, France pays more interest on the debt than to Defense, reports The Wall Street Journal. The country is confronted with a predicted budget deficit of 5.5 percent before 2025, almost twice as much as the EU standard of a maximum of 3 percent.
New prime minister must be cut through parliament
The credit rating agency warned that the Schuldenberg of France will continue to rise until 2027 if measures are not taken quickly. Bayrou wanted to cut 44 billion.
It is now up to the new Prime Minister Sébastien Lecornu to get enough support in parliament. Solid opposition awaits him there. When he took office, Lecornu said he would immediately discuss the controversial cuts with political groups and trade unions, which were the reason for protests throughout France under the name ‘Bloquons Tout’ (Block everything).
Credit Rating Agency Fitch Downgraded France’s Credit Rating From Aa-To A+ On Friday. Accordance to the agency, this is due to political instability in the country and public finances.
Earlier This Week, The French Parliament Ousted Prime Minister François Bayrou After a conflict over the budget. Bayrou had Propose Reducing Government Spending by 44 Billion Euros Through Unpopular Cuts.
“The Fall of the Government Vote a Vote of Confidence Demonstrates The Fragmentation and Increasing Polariazation of Domestic Politics,” Fitch Said. “This Instability Hinders The Ability of Politicians to Implement Far-Reaching Fiscal Consolidation.”
Fitch is one of the leading rating agencies. With the downgrade, it may be more difficult for the French Government to Borrow Money at favorable interest rates. Investors are more likely to lend money to governments with a good rating at a lower interest rate to be sure they get their money back.
Due to the National Debt, which has now risen to 114 percent of GDP, France Pays More in Interest on the Debt Than On Defense, Reports The Wall Street Journal. The Country Faces A Projected Budget Deficit of 5.5 percent by 2025, Almost Twice the EU standard of a maximum or 3 percent.
New Prime Minister Must Get Cuts Through Parliament
The Credit Rating Agency Warned That France’s Debt Mountain Will Continue to Rise Until 2027 If Measures Are Not Tasks Quickly. Bayrou Wanted to Cut 44 Billion.
It is now up to the new prime minister Sébastien Lecornu to Gain Enough Support in Parliament. He faces strong opposition there. Upon Taking Office, Lecornu Imediately Said He would enter Into Discussions with Factions and Trade Unions about the controversial cuts, which were the reason for protests Throughhout France under the name ‘Bloquons Tout’ (Block Everything).