French Economy Minister Says Devaluation Means Savings Needed

PARIS, June 2 — French Economy Minister Bruno Le Maire said yesterday he is committed to securing billions of dollars in new government spending cuts after ratings agency Standard & Poor’s downgraded France’s debt.

The US agency justified its decision to drop France’s long-term sovereign debt rating from „AA” to „AA-” due to concerns about lower-than-expected growth.

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S&P is among the agencies and economists who are skeptical of the government’s pledge to reduce the budget deficit below three percent of GDP by 2027.

Le Maire launched a media campaign after Friday’s announcement to defend the government’s spending record.

In a video posted on YouTube on Saturday, he vowed to „continue exactly on the same path, without speeding up or slowing down.”

In interviews with French media, Le Maire rejected the tax increase. But he said no decision has been taken on decoupling pension and other social benefits from the rate of inflation.

The minister prioritized cutting France’s €450 billion (RM2.5 trillion) government spending each year.

He highlighted 10 billion euros in spending cuts earlier this year and said he was committed to finding another 10 billion in savings by 2024.

The government lacks a parliamentary majority and Le Maire said the S&P decision should „open the eyes” of French lawmakers.

S&P warned that „political fragmentation” would make it difficult for the government to implement reforms to balance public finances, and that the budget deficit would remain above the target of three percent of GDP in 2027.

But the second-largest EU economy’s general deficit for 2023 was 5.5 percent of GDP, instead of the forecast 4.9 percent, raising alarm for several rating agencies.

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France’s general government debt will increase to around 112 percent of GDP in 2027, up from 109 percent in 2023, „contrary to our previous expectations,” S&P said.

Le Maire told Le Parisien newspaper that the downgrade was primarily driven by government spending during the Covid-19 pandemic.

A credit downgrade scares off investors and makes it more difficult to pay off debt.

Earlier this year, Moody’s and Fitch downgraded France.

S&P maintained its „stable” outlook for France with expectations that „real economic growth will accelerate and support the government’s fiscal consolidation,” though not enough to ease its high debt ratio. – AFP

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