Frances sovereign credit rating was just downgraded by the rating agency Fitch, which warned that the nation’s economy was likely to endure some level of damage as the nation protests the recent reforms to France’s pension system.
The rating agency lowered France’s credit rating from “AA” to “AA-,” with a stable outlook. The downgrade is likely to increase borrowing costs for the nation, as it will make investors view purchasing its debt as a more risky venture.
The agency wrote, “Fitch believes that social and political pressures illustrated by the protests against the pension reform will complicate fiscal consolidation,” adding, the government bypassing a parliamentary vote to force through the pension measure would “likely further strengthen radical and anti-establishment forces.”
Fitch went on to warn, “Political deadlock and (sometimes violent) social movements pose a risk to Macron’s reform agenda and could create pressures for a more expansionary fiscal policy or a reversal of previous reforms.”
In mid-April, French President Emmanuel Macron signed the pension reform bill into law, despite widespread disapproval and nationwide protests, as well as resistance in Parliament. The measure raised the retirement age from 62 to 64, in an effort to shore up the finances of the program. The unions and other political opposition vowed in the wake of its passage to continue protesting the measure. Analysts warned that the public unrest will likely stifle any further reforms, since the President’s party does not have a majority.
Economy Minister Bruno Le Maire insisted, however that France will pay no mind to Fitch’s warnings as it continues to to pursue structural reforms to the government’s programs.
In an interview with AFP on Saturday, Maire said, “I believe that the facts invalidate the assessment by the Fitch agency… We are able to implement structural reforms and we will continue to implement structural reforms for the country.” He promised the country would accelerate its debt reduction, place the public finances on a more solid foundation, reduce deficits, and cut public expenditures at an even faster rate.
