{"id":156077,"date":"2025-09-20T01:24:07","date_gmt":"2025-09-20T01:24:07","guid":{"rendered":"https:\/\/www.newsbeep.com\/ca\/156077\/"},"modified":"2025-09-20T01:24:07","modified_gmt":"2025-09-20T01:24:07","slug":"frances-debt-downgraded-by-second-rating-agency-within-a-week","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/ca\/156077\/","title":{"rendered":"France\u2019s debt downgraded by second rating agency within a week"},"content":{"rendered":"

Unlock the Editor\u2019s Digest for free<\/p>\n

Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.<\/p>\n

France\u2019s debt was downgraded by a second rating agency in the space of a week, underscoring doubts the country can deliver on promises to tame its debt during a period of political instability.<\/p>\n

Morningstar DBRS demoted France\u2019s long-term issuer rating to AA from AA (high) and changed the trend to stable from negative late on Friday. It came a week after Fitch also reduced its rating<\/a> for the country\u2019s sovereign debt.\u00a0<\/p>\n

France\u2019s minority government collapsed in a confidence vote on support for deficit cutting measures in the 2026 budget earlier this month. <\/p>\n

S\u00e9bastien Lecornu<\/a>, formerly defence minister, was picked by President Emmanuel Macron to try to form a new government in a fractured parliament where no group holds a clear majority.\u00a0<\/p>\n

Macron called and lost snap legislative elections last summer, deepening the political instability. Lecornu is the fifth prime minister of Macron\u2019s second term, and is expected to try to broker a compromise with leftwing lawmakers in order to pass a budget.\u00a0<\/p>\n

Morningstar \u201cconsiders that this political environment and the increased government instability constrain the effectiveness of fiscal policy settings\u201d. It added: \u201cIn this context, [we] view high execution risks regarding France\u2019s capacity to deliver on its fiscal targets in the coming years.\u201d<\/p>\n

France posted the largest fiscal deficit of the Eurozone in 2024 and is likely to do so again in 2025, according to Morningstar, even if it meets its own target of 5.4 per cent of GDP \u2014 far above the EU\u2019s 3 per cent limit. <\/p>\n

The country is already in an excessive deficit procedure with Brussels for breaking the bloc\u2019s fiscal rules.\u00a0France blew past its deficit forecasts last year because of lower than expected tax revenues in 2023 and higher public spending.<\/p>\n

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\"A<\/a><\/p>\n

Former prime minister Fran\u00e7ois Bayrou presented a \u20ac44bn package of tax rises and budget cuts for the 2026 exercise, but it was voted down by leftwing and far-right opposition parties. Lecornu\u2019s measures will probably be less ambitious, Morningstar noted.\u00a0<\/p>\n

The political impasse sent\u00a0France\u2019s borrowing costs near to their highest level since the Eurozone debt crisis more than a decade ago.<\/p>\n

Despite these challenges, France has the advantage of a \u201clarge, diversified and resilient\u201d economy as well as strong governance and institutions, the rating agency noted. <\/p>\n

An improvement in France\u2019s fiscal position could lead to an upgrade, it added. However, it could be downgraded again if no improvement in the country\u2019s fiscal imbalances is recorded over the medium term.<\/p>\n

\u201cAll else equal, Morningstar DBRS could lower the credit ratings if France\u2019s debt-to-GDP ratio continues rising on a sustained basis towards 125 per cent, and particularly if combined with a materially heavier interest burden,\u201d it wrote.\u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"Unlock the Editor\u2019s Digest for free Roula Khalaf, Editor of the FT, selects her favourite stories in this…\n","protected":false},"author":2,"featured_media":156078,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[45,49,48,46],"class_list":["post-156077","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-business","tag-ca","tag-canada","tag-economy"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/156077","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/comments?post=156077"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/156077\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media\/156078"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media?parent=156077"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/categories?post=156077"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/tags?post=156077"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}