Excessive deficits and booming debt, accompanied by weak growth and stagnant employment. Do you think we’re talking about Italy as usual? Wrong. The gloomy picture above is now more suitable for the French cousins than for the rest of us. So much so that on May 31st, while the Moody’s agency confirmed Italy’s Baa3 rating, Standard & Poor’s cut France’s by one notch, from AA to AA-. Net of the different acronyms used for the report cards, Paris fell from third to fourth place on the “investment grade” scale, while Rome remained in ninth (tenth according to Moody’s). And a short time ago the Fitch agency also downgraded France to the same level.
For President Macron – who would have done without this news a week before the European elections – the deficit was a prisoner: «The downgrading reflects the projection that – writes S&P – contrary to our previous expectations, France’s public debt as a percentage of GDP will increase due to larger-than-expected budget deficits over the 2023-2027 period.” But the higher-than-expected deficit (the projection for 2023 is 5.1%, one point higher than the estimate) is nothing more than the point of decline of an economy that shows various points of weakness, even more evident when compared with ours.
At GDP level, in the first quarter France grew less than Italy (0.2% versus 0.3%); in the last three quarters the gap has more than doubled (0.4 versus 0.9%); and at a cumulative level, since the last pre-pandemic quarter of 2019 Italy has achieved 4.6%, France 2.2. Upstream there is unemployment which stopped falling in 2023, to the point that last March, Italy made a historic overtaking, recording a rate of 7.2% lower than the 7.3% of the French.
If we then look at the debt, as Marco Fortis wrote in Il Sole, between 2020 and 2023, net of interest, the transalpine debt grew by 551 billion against the 170 accumulated by the Italian Republic. So much so that in absolute value the French debt has already broken through 3 thousand billion (it is over 3,100) while ours is still below (2,900 billion).
Of course, in relation to GDP, Paris is always doing better, with a ratio of 110% compared to Italy’s 138%. But the dynamics we have seen, that of the deficit in particular, do not bode well. How S&P certified by cutting its rating. Playing a bad joke on Macron.
