Debt: after Fitch, the Scope agency lowers the outlook for France

"We are able to pass structural reforms for the country," assured the Minister of the Economy after the Fitch agency downgraded the rating of the France at the end of April. But Bruno Le Maire did not convince either the European rating agency Scope, which, for its part, lowered the outlook for the France on Friday, which means that its rating could be downgraded in the future, like the Fitch agency.

Scope explains its decision in a statement by the risk of "the weakening of public finances" in particular due to difficulties in "the implementation of reforms". This action means that it could downgrade the France's rating, currently at "AA", the third highest level of its grid, "within 12 to 18 months".

Among the risks weighing on French finances, the agency notes that "economic momentum slowed significantly in the second half of 2022". It is also unconvinced of the path of reducing the public deficit and debt, due to a "poor record on fiscal consolidation, a rising debt interest burden and risks related to the implementation of the reform agenda". These risks are linked to "the absence of a majority in Parliament" and "socio-political protests", citing in particular the protests against the pension reform.

Impacts on interest rates

At the end of April, the rating agency Fitch, one of the three largest in the world, had downgraded the rating of the France, because of the risk posed by "the political impasse and social movements (sometimes violent)" on the reforms wanted by Emmanuel Macron. A week earlier, Moody's had not made a rating. S&P Global, which currently gives the France an "AA" rating with a negative outlook, is due to publish its findings on June 2.

The rating of these agencies affects the interest rate at which investors lend money to the France. On the 10-year bond, the reference maturity, the rate was 3.11% on Friday, close to its highest levels of the year. Bond yields have risen sharply over the past year and a half, due to central bank policy trying to control inflation.