By John Meyer, consultant in financial affairs – Eurasia Business News, October 14, 2024. Article No 1263.

Fitch Ratings has issued a warning regarding France’s financial outlook, revising it to negative while maintaining the country’s credit rating at AA-. This decision comes on the heels of the French government’s presentation of its 2025 budget, which aims to address significant fiscal challenges.

Key Points from Fitch’s Assessment

Increased Fiscal Risks: Fitch cited rising fiscal policy risks as a primary reason for the negative outlook. The agency anticipates that government debt could escalate to 118.5% of GDP by 2028 due to projected wider fiscal deficits and a deteriorating fiscal position this year.

Budget Shortfalls: France’s public finances have worsened, with tax revenues falling short and expenditures exceeding expectations. The annual budget deficit is projected to reach 6.1% of GDP this year, significantly above earlier forecasts.

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Political Fragmentation: The current political landscape, characterized by a minority government and high fragmentation, complicates efforts to implement necessary fiscal reforms. Fitch noted that this instability could hinder sustainable fiscal consolidation measures.

Government Response

In response to these challenges, the new French Finance Minister Antoine Armand emphasized the government’s commitment to realigning public finances through the proposed budget, which includes €60 billion in spending cuts and tax increases targeting wealthier individuals and large corporations. 

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However, Fitch remains skeptical about the government’s ability to meet its fiscal targets without significant political concessions and public support.

France’s public debt, calculated according to Maastricht Treaty criteria, rose from € 2,281 trillion to over € 3,200 trillion (112 percent of GDP), in the seven years from 2017 to 2024, the period during which the former minister headed the Economy and Finance Ministry.

Future Implications

Fitch’s warning highlights the precarious state of France’s finances, with potential implications for borrowing costs and investor confidence. If the government fails to execute its proposed fiscal strategies effectively, further downgrades could be on the horizon from Fitch and other rating agencies

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© Copyright 2024 – Eurasia Business News. Article no. 1262.