Standard & Poor’s has lowered its rating on France one notch to AA, citing its weak economic growth prospects and fiscal policy constraints.
The rating agency says that it is downgrading the rating based on its view that “the French government’s current approach to budgetary and structural reforms to taxation, as well as to product, services, and labor markets, is unlikely to substantially raise France’s medium-term growth prospects.”
Additionally, it says that the country’s fiscal flexibility is constrained by moves to increase already-high tax rates, and the government’s inability to significantly reduce total government spending. “Furthermore, we believe lower economic growth is constraining the government’s ability to consolidate public finances,” it says.
S&P says that the country’s rating is constrained by the “French government’s elevated spending and tax levels, its high and still rising general government debt burden, and constraints on economic competitiveness. All these factors weaken France’s
growth prospects.”
The outlook is stable, reflecting S&P’s view that the rating is unlikely to be changed again in the next two years.