Rating agency Fitch has downgraded France’s sovereign credit rating, warning that public resistance to a recent pension reform could take a toll on the economy.
The agency lowered the rating from “AA” to “AA-,” with a stable outlook. The downgrade means France is considered a more risky venture for investors, which could lead to higher borrowing costs.
“Fitch believes that social and political pressures illustrated by the protests against the pension reform will complicate fiscal consolidation,” the agency wrote. It added that the government’s decision to bypass a parliamentary vote to push through the pension reform 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 warned.
French President Emmanuel Macron signed the unpopular pension reform into law in mid-April, despite months of nationwide protests and resistance in parliament. The measure raised the retirement age from 62 to 64. Following its enactment, the political opposition and unions vowed to continue contesting the move. Analysts have warned that as the president’s party does not have a parliamentary majority, it may be difficult for it to deliver on other reforms due to the public unrest.
French Economy Minister Bruno Le Maire, however, pledged that Paris will continue structural reforms despite Fitch’s warnings.
“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 told AFP on Saturday. The official vowed to accelerate the country’s debt reduction, to restore the public finances, reduce deficits and make faster cuts to public expenditure.
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