The bar still seems too high.
The rating agency Moody's judged on Wednesday "unlikely" that France will meet its objective of reducing the public deficit to 2.7% by 2027, further estimating the 10 billion additional savings in 2024 insufficient to "restore the government on the planned budgetary trajectory.
Tuesday's announcement of a slippage in the deficit to 5.5% of GDP (gross domestic product) in 2023 "makes it improbable" that the government will meet its objective of reducing the deficit to 2.7% of GDP by 2027, “as provided for in its medium-term budget plan presented in September,” Moody’s wrote in a press release.
The American agency specifies that the notice published Wednesday is not a rating notice strictly speaking.
Is the objective of 4.4% this year out of reach?
“The larger-than-expected deficit is almost entirely due to lower-than-expected revenues,” Moody's adds.
This higher deficit “underlines the risks inherent in the government's medium-term budgetary strategy, which is based on optimistic economic and revenue assumptions, as well as unprecedented reductions in spending,” judges the rating agency.
Furthermore, Moody's considers it "unlikely" that the government will meet its objective of a deficit of 4.4% this year despite the savings in the 2024 budget and the additional cuts announced.
Reducing the deficit by one percentage point in one year, excluding exceptional circumstances linked to Covid, “has only been done once since 2000”, recalls the agency.
Moody's also expects the level of public debt to rise "slowly" from 2024, exposing the country to interest costs "not seen in more than 20 years".
INSEE revealed on Tuesday that France's public deficit finally reached 5.5% of GDP in 2023, or 15.8 billion euros more than the government had planned, complicating the debt reduction objective. yet reaffirmed Tuesday by the Minister of the Economy.
The increase in the deficit is explained in particular by revenues which “slow down significantly in 2023” (+ 2% against + 7% in 2022), specified INSEE, and even taxes “almost at a standstill” (+ 0.3%, compared to 7.9% in 2022).
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The first president of the Court of Auditors, Pierre Moscovici, regretted on Tuesday a “significant” and “very, very rare” slippage in the deficit.
“This exceptional deficit is not linked to a surge in public spending”, but “to lower revenue than anticipated, despite a sincere and realistic growth figure” on the part of the government, defended Bruno Le Maire, mentioning “21 billion euros less revenue in 2023”.
France, the third most indebted country in the euro zone, has promised its European partners to bring its deficit below 3% of GDP in 2027, an objective that the Minister of the Economy maintains with “total determination”.
The Moody's agency is due to issue conclusions on the solvency of French debt on April 26, with a possible update of its rating on the key subject.
Last October, she maintained France's rating, “Aa2”, one of the best possible, a decision proving “the credibility” of the country, Bruno Le Maire assured at the time.
Another major rating agency, Fitch, is also due to assess French debt on April 26.
A third, Standard & Poors, will decide on May 31.