Far-right policies would be a consideration for French rating - S&P

BY Reuters | CORPORATE | 06/13/24 10:52 AM EDT

By Yoruk Bahceli and Marc Jones

June 13 (Reuters) - Ratings agency S&P Global, which recently downgraded France, said on Thursday that policies advocated by the far-right National Rally could have implications for the country's rating.

President Emmanuel Macron called a shock snap legislative election on Sunday following a bruising loss in the weekend's European Parliament vote to Marine Le Pen's far-right National Rally (RN), which is leading the polls for the first round on June 30.

Frank Gill, S&P Global's top analyst for EMEA sovereign ratings, said policies the RN has advocated such as cutting some categories of value added tax, and reversing social security reforms like the increase in the retirement age, "could further drag on public finances and they could and would be a consideration for the sovereign rating."

"We don't think France has a lot of fiscal space," Gill added, citing the 13 percentage-point increase in France's debt-to-GDP ratio between 2019 and 2023.

"So, the elections matter for that reason, but we're going to wait and see what the policies are," he added.

S&P Global downgraded France's rating on May 31 to AA- with a stable outlook from AA, citing its budget deficit overshoot expected to lead to an increase in debt.

Uncertainty unleashed by the shock election has hurt the euro and French assets this week. The possibility that the RN could win has compounded investor concerns around France's fiscal discipline.

Rival ratings agency, Moody's and Fitch have also warned that the uncertainty stemming from the elections are negative for France's credit score. (Reporting by Yoruk Bahceli and Marc Jones; editing by Dhara Ranasinghe)

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