France‘s Scorched Policy: Credit Rating Impasse Sparks Balanced Budget Concerns
© Bertille LAGORCE, Sabrina BLANCHARD / AFP
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What specific policy actions can France take to address its high debt levels and reassure investors, as suggested by Dr. Dubois?
## France’s Scorched Policy: Credit Rating Impasse Sparks Balanced Budget Concerns
**Host:** Welcome back to the show. Joining us today is Dr. Anne Dubois, an economist specializing in European fiscal policy. Dr. Dubois, thanks for being here.
**Dr. Dubois:** It’s a pleasure to be here.
**Host:** Let’s discuss France’s recent credit rating update from S&P Global. They’ve affirmed France’s ‘AA/A-1+’ ratings but maintained a negative outlook. What are the key takeaways from this announcement? [[1](https://www.spglobal.com/ratings/en/research/articles/230602-research-update-france-aa-a-1-ratings-affirmed-outlook-remains-negative-12748639)]
**Dr. Dubois:** Essentially, S&P recognizes France’s economic strengths but remains concerned about its ability to sustainably manage its finances. They highlight tighter financial conditions and persistent core inflation as factors restraining economic growth in the near term.
**Host:** So, what does this ”negative outlook” imply for France’s fiscal future?
**Dr. Dubois:** It essentially means that
S&P believes France faces significant challenges in reducing its budget deficit and controlling its debt. While they predict a decline in the deficit to 3.8% of GDP by 2026, from an estimated 5% in 2023, this still leaves France with a debt exceeding 110% of GDP. This level of debt makes France vulnerable to economic shocks and limits its ability to invest in crucial areas like infrastructure and education.
**Host:** What policy prescriptions would you recommend to address these concerns and improve France’s fiscal outlook?
**Dr. Dubois:** France needs to pursue a multi-faceted approach. Firstly, implementing structural reforms to boost productivity and competitiveness is critical. Secondly, while maintaining social safety nets, it’s essential to contain public spending and identify areas for increased efficiency. clear and consistent government communication regarding fiscal policy is vital to reassure investors and foster confidence in the French economy.
**Host:** Exciting times ahead for France. Dr. Dubois, thank you for sharing your expert insights.
**Dr. Dubois:** Thank you for having me.
