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The “Italian scenario” for France has started with a downgrading of Paris’ sovereign debt by S&P, from AA to AA-. The rating is still in a relatively safe zone (investment grade 4), but what is important is the trajectory, showing a growing gap between the physical economy and debt.

In the post-pandemic scenario (2020-2023), France’s GDP has grown by a nominal 2.2% and the last quarter was virtually flat (0.2%), while government debt has grown by 551 billion Euro in the same period. This makes a 110% debt to GDP ratio, with a 5.1% deficit projected for this year. This is why S&P wrote that “France’s government debt as a GDP percentage will increase because of a higher deficit than forecast, in the 2023-2027 period.”

In absolute terms, French sovereign debt is the highest in the Eurozone, with 3.1 trillion, followed by Italy (2.8) and Germany (2.7).

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