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The Fitch rating agency downgraded France’s rating.
France Shown Yellow Card
by Yvette Krolikowski
13 May 2023

On Friday 28 April 2023, the Fitch financial rating agency downgraded France’s rating from AA to AA- with ’stable outlook’.
The agency said, “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.” [1].

Social movements pose a risk to the reform agenda and could create pressures for a more expansionary fiscal policy or a reversal of previous reforms

The agency reflects the system’s concerns about whether reforms can actually be carried out against social resistance: “The decision has led to nationwide protests and strikes and will likely further strengthen radical and anti-establishment forces.” This is unintentionally a tribute to the strength of the citizens’ mobilization that has now lasted for over three months.
Fitch concludes that it could lead to relatively large fiscal deficits and only modest progress with fiscal consolidation, as well as “weaker global growth” than had been forecast.

French Economy and Finance Minister Bruno Le Maire said Fitch’s “pessimistic” assessment “underestimates the consequences of reforms”, particularly the retirement pensions reform. He hastened to reassure investors and financial markets claiming that France would continue implementing structural reforms in order to reduce its public deficit and its sovereign debt.
Two days ealier, the 2023-2027 Stability Programme was presented to the Council of Ministers, providing for a “cooling of public spending”, particularly by local authorities. No more “whatever it takes”, Bruno Le Maire repeated.

Moody’s agency, which was to update its rating on 21 April, eventually did not change its previous rating (AA2, outlook stable). On 2 June S&P Global Ratings (Standard & Poor’s) is to update its current rating ‘AA, outlook negative’. The French ministers will in between time put every effort into reassuring the financial community of their determination to continue with austerity policies and their certain success.

Social movements are now warned that agencies’ ratings are there to reprimand the States and coerce them to follow the directives imposed by the financiers, with the prospect of new austerity measures, presented as magic formuli, all too familiar to the people.

This is an opportunity to review the obnoxious role played by rating agencies. Who are they exactly?

They assess, allegedly independently, the risk of bankruptcy or non-repayment of a debt

Financial credit rating agencies are private companies that analyze the creditworthiness of an entreprise, community or state, estimating the risk of default by these potential borrowers. They assess, allegedly independently, the risk of bankruptcy or non-repayment of a debt. On the basis of these assessments, which take the form of ratings, they inform investors of the risks they do or do not run by lending to a given entity.
The influence and profitability of these companies have increased as more investors and borrowers pay for their surveys.

Agencies claim that they only voice opinions as to risks at a given time. They thus disclaim any responsibility for the consequences of decisions taken on the basis of their assessments.

The Big Three

The three main rating agencies in the world, called The Big Three account for 95% of the sector’s turnover (S&P Global Ratings, 40 % ; Moody’s, 40 % ; Fitch, 15 %). They thus have a significant influence (and therefore nuisance value) on the borrowing conditions of States.

In 1975, the Securities and Exchange Commission (SEC – the US federal body that regulates and monitors financial markets) created the status of NRSRO (Nationally Recognized Statistical Rating Organizations) thus allowing financial regulations to use the agencies’ ratings as references. This label reinforced the importance of rating. The Big Three were initially the only agencies to be accredited. Subsequently, the few agencies that obtained the label between 1980 and 1990 were all absorbed, so that today the Big Three reign supreme.
Dagong, the Chinese agency created in 1994, only just emerges on the markets.

Obvious conflicts of interest

Originally, the payers were the investors who wanted an opinion on the risks involved in order to calculate interest rates before lending. The better the rating, the lower the interest rate to be paid and vice versa. The lender was therefore asking for information on potential borrowers.
Since the 1970s, bond issuers (either private companies or public authorities) have mainly become the applicants for ratings (companies normally apply to two agencies). They seek to have a rating because, without a rating, investors will not take the risk of buying a bond or, if in doubt, will charge a high interest rate.
Agences are now mostly paid by those they rate. The question of their independence and the reliability of their ratings can therefore be seriously raised. The risk of conflicts of interest is obvious: the agencies have an interest in their clients being well rated so that they issue more and more financial products and need to be rated. Their income is assured.

Sovereign rating, i.e. the rating of State debts, is less profitable than that of companies. Industrialized States do not pay as they cannot see the point of remunerating agencies and considering that investors know their financial soundness. [2] Yet most States are rated by agencies, with sometimes serious consequences.


These agencies act as a powerful incentive to implement creditor-friendly economic policies

Ratings range from AAA, for the very best, to C (for Moody’s) and D for the junk. They may add a note on an “outlook,” that can be stable or negative.

The first analyses of sovereign risk, independent of banks, began in 1918 by Moody’s. Since then, more and more governments have been issuing securities on the markets, thus requesting a rating. Moody’s rated 112 countries in 2011, S&P Global Ratings 120.

For sovereign ratings, five main criteria are taken into account: GDP per capita, political and institutional stability, debt level, the government’s compliance with its financial obligations in the past years and the inflation rate. Depending on agencies, other standards may be taken into account such as the geopolitical context or a government’s capacity to reduce its expenditure and to implement austerity measures.[2]. [3] Because of the central importance of their ratings in today’s economy, these agencies act as a powerful incentive to implement creditor-friendly economic policies.
Two additional criteria are taken into account by the agencies in relation to Southern countries: foreign exchange reserves and the value of the remittances sent by migrant workers to their country of origin.


It is especially since the financialisation of the economy and the outbreak of the Mexican debt crisis in 1982 that rating agencies have become permanently established in the domaine of sovereign debt.

The regulators and the markets gave them this importance. The official status given to the large agencies by the US SEC in the 1970s reinforced this position.
The Basel II Accords1 use the agencies’ ratings to calculate the capital requirements for banks. In the markets, many investors require a minimum rating level for their portfolio selection. Officially, the ECB itself only lends to commercial banks in exchange for assets rated “investment grade”, i.e. low risk.
From one crisis to another rating agencies are increasingly criticized

On the eve of its failure in 2008, the US bank Lehman Brothers was still rated AAA: it collapsed like a house of cards


In 1929 already, rating agencies had failed to anticipate the crisis. By late 2001, they maintained a good rating for the energy broker Enron until four days before its fraudulent bankruptcy. On the eve of its failure in 2008, the US bank Lehman Brothers was still rated AAA: it collapsed like a house of cards.

On 10 November 2011, S&P Global Ratings announced that France’s sovereign debt was downgraded then issued a denial acknowledging a mistake.


Conflits of interest are one of the main issues with rating agencies, particularly in the case of structured products. The rating agency and the designer of the structured product (usually an investment bank) make agreement beforehand: the agency has a hand in the product’s design and is thus both judge and jury. [4] In early 2008, Moody’s gave the highest rating to structured products that triggered the financial crisis.

Part played in the Greek crisis in 2010

In the Greek public debt crisis of 2010, the agencies actually fuelled financial market speculation. By lowering the rating of a country in difficulty, they only maintain and aggravate its situation: "It’s like pushing someone who is on the edge of a cliff. It aggravates the crisis.” [5] Some speak of a vicious circle and self-fulfilling prophecies. In the case of Greece, the agencies have made it harder for the state to find finance, with serious consequences in terms of deepening austerity policies.


In response to the scale of the problem, the SEC and other regulators, including the European Commission, have announced their intention to take action to regulate the activity of agencies and limit their ability to cause harm. In 2013, the EU adopted rules that were presented as a step in this direction. [6] However, it is clear that these measures are far from sufficient to disarm the agencies.


Numerous proposals aimed at reforming the functioning of rating agencies have been put forward since the financial crisis began in 2007-2008, without much success: a return to the “investor-pays” system, a review of the rating criteria adopted, and the suspension of the rating of an indebted State that is negotiating an international “financial aid” programme are some examples.

For the CADTM, it is the very existence of private rating agencies that must be questioned. An iintegral part of neoliberal system of domination, they do not hesitate to manipulate and lie to satisfy the short-term interests of big capital, as shown by the favourable ratings given in 2008 to the Merrill Lynch and Lehman Brothers investment banks, just before the former was bought up on the brink of collapse and the latter liquidated. These agencies should be prosecuted for their actions that have serious consequences for people, and public actors should refuse to be evaluated by them (this is what the Madrid City Council did in 2016-2017 when it decided not to renew its contracts with S&P Global Ratings and Fitch, considering these rating agencies useless and their interference illegitimate). As regards companies, their creditworthiness could be assessed by public bodies in order to prevent conflicts of interest.
Although the rating agencies claim to be independent and only issue opinions, it is clear that they are one of the tools at the service of the financial markets, using the pressure of these warnings to discipline states that strongly fear their disapprobation.

But the good news is that according to Fitch’s comments social movements can actually be a threat for the implementation of austerity programmes. Forward Comrades!!!

Translation : Christine Pagnoulle and Mike Krolikowski.

Footnotes :

[2By the end of 2011, high-income countries rated by S&P Global Ratings and not paying any fee to the agencies were Australia, Belgium, France, Germany, Italy, Japan, the Netherlands, Singapor, Switzerland, Taiwan, the United Kingdom and the United States.

[4See Nicolas Véron,What can and cannot be done about rating agencies, Bruegel Policy contribution, October 2011.

[5Pier Carlo Padoan, deputy secretary general and chief economist of the OECD. See 8 August 2011.

[6European Commission (2013). Stricter rules for credit rating agencies to enter into force.

Yvette Krolikowski

Membre du CADTM France et de l’équipe ’site’.