08 JUL 2024 – 16:39
The result of the French legislative elections reduced tension in the markets on Monday, with positive effects on the French risk premiumbut the uncertainty over a possible political paralysis in the second largest economy in the Eurozone, weighed down by the delicate situation of public finances, meant that the S&P rating agency warned that his note to the French debt might be “under pressure” once more.
That would happen if economic growth were significantly lower than forecasts for a prolonged period or if France “failed to reduce its significant budget deficit” and if the debt burden as a percentage of public revenues increased more than anticipated.
After having lowered this rating in May, the agency anticipated in its latest projections that French debt would rise to 112% of gross domestic product (GDP) in 2027 (in the first quarter of this year it rose eight-tenths to 110.7%) and that the deficit would not fall below the 3% limit set by European rules in that horizon (in 2023 it shot up to 5.5%).
