Fitch downgrades France’s rating amid protests over pension reform

The international rating agency Fitch has decided to downgrade France’s long-term issuer default rating in foreign currency to the level of “AA-” with a stable outlook, should from the agency.

This step is due to a combination of factors, including the consequences of mass protests due to the increase in the retirement age, which are also accompanied by strikes and clashes with the police, which could lead to a worsening of the economic situation in the country.

Fitch recalled that the government of President Emmanuel Macron took advantage of Art. 49.3 of the constitution to pass the pension reform without the approval of Parliament, where it lost its majority. “This decision has led to protests and strikes across the country, and is likely to contribute to the strengthening of radical and anti-government forces,” the agency noted.

The rating agency’s experts also predict an increase in the French budget deficit from 4.7% in 2022 to 5% of GDP this year against the backdrop of weaker economic growth and accelerating inflation.

Mass protests in France began after residents learned of the authorities’ intention to raise the retirement age, clashes between demonstrators and police continue to this day. In mid-March, French Prime Minister Elisabeth Born announced the adoption of a law raising the country’s retirement age from 62 to 64 years. This happened without a final vote in the lower house of parliament. Due to the risk of not getting the required number of votes in the lower house of parliament, Macron approved the use of Art. 49.3 of the constitution, which allows the adoption of a law without the approval of parliament.