Fitch, American credit rating agency, has lowered France’s sovereign credit rating and issued a warning that economic damage could result from public opposition to a recent pension reform.
The agency downgraded the rating from “AA” to “AA-,” with a stable outlook. Due to the downgrade, France is now seen as a riskier investment, which could result in increased borrowing costs.
“Fitch believes that social and political pressures illustrated by the protests against the pension reform will complicate fiscal consolidation,” the rating agency stated. It continued by saying that the government’s choice to pass the pension reform without parliamentary approval will “likely further strengthen radical and anti-establishment forces.”
“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,” Fitch report informed.
Despite months of widespread protests and opposition in parliament, French President Emmanuel Macron signed the unpopular pension reform into law in the middle of April. Consequently, the retirement age was increased from 62 to 64.
The political opposition and unions vowed to keep opposing the measure after it was put into effect. Analysts have cautioned that given the anger in the public, the president’s party may find it challenging to implement further reforms because it lacks a parliamentary majority.
However, despite Fitch’s cautions, French Economy Minister Bruno Le Maire vowed that Paris would continue structural reforms. “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,” Le Maire informed AFP on Saturday. The official committed to speed up the nation’s debt reduction, repair the public finances, decrease deficits, and accelerate public spending reductions.
