KBRA Assigns AA/K1+ Ratings to the French Republic

Kroll Bond Rating Agency Europe Limited (KBRA) assigns AA long-term issuer ratings to the French Republic. KBRA also assigns K1+ short-term issuer ratings to the sovereign. The long-term ratings carry a Stable Outlook. The sovereign credit report is available here

Ratings
			Rating			Outlook			Action
Foreign Currency Sovereign Rating-Long Term			AA**			Stable			Assigned
Local Currency Sovereign Rating-Long Term			AA**			Stable			Assigned
Foreign Currency Sovereign Rating-Short Term			K1+**						Assigned
Local Currency Sovereign Rating-Short Term			K1+**						Assigned

Main credit support factors

• Leading global economy that shares the institutional and development characteristics of the most advanced industrialised economies.
• Significant geostrategic influence given its importance to the European Union (EU) and global politics.
• Large, wealthy and highly diversified economy. Lower export dependency than peers and broad diversification underpins macroeconomic stability.
• Strong financing flexibility given ample demand from both domestic and nonresidents for French government bonds. France enjoys benchmark fixed-income status in Europe. Low funding costs and lengthy average maturity underpin high debt affordability.

Main credit concerns

• Elevated general government debt, in the context of a very high revenue intake, reduces fiscal flexibility and France's capacity to respond to economic and financial shocks.
• High public expenditure, a heavy tax burden and regulatory barriers stifle competitiveness and act as an impediment to stronger growth.
• The highly segmented nature of the French labour market and long-standing rigidities such as limited mobility between sectors and regions are being addressed but remain an impediment to greater economic vibrancy.
• Reduced competitiveness due to structural constraints, although there is awareness of the need to correct these problems.

KBRA's sovereign ratings of the French Republic reflect the large scale and diversification of the economy, its high-income status, long-standing macroeconomic stability, institutional robustness, significant financing flexibility, stable banking sector, and membership of the EU and euro area. The elevated government debt burden, high annual public expenditures, weaker macroeconomic performance vis-à-vis peers, and persistent weaknesses in the labour and product markets are rating constraints.

The ratings are based on KBRA's Sovereigns Rating Methodology published on 10 May 2017. Weights used for assigning these ratings are described in the methodology used for this credit rating action.

Disclosures:

Further disclosures relating to this rating action are available in the EU Information Disclosure Form. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com

This is an unsolicited rating. The rated entity or related third party did participate in the rating process and KBRA did have access to the accounts and other relevant internal documents.

Related Publications:(available at www.kbra.com

• French Republic Rating Report
• Sovereigns Rating Methodology

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About KBRA and KBRA Europe

KBRA is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider, and is a certified Credit Rating Agency (CRA) by the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a CRA.

1	Unsolicited where the rated entity or a related third party did participate in the rating process
2	Unsolicited where the rated entity or a related third party did not participate in the rating process
	With access to the accounts and other relevant internal documents
	Without access to the accounts and other relevant internal documents

View source version on businesswire.com: https://www.businesswire.com/news/home/20190329005454/en/

Contacts:

Analytical Contacts:

Alan Madden, Director (Lead Analyst), Dublin
[phone]
[e-mail]

Joan Feldbaum-Vidra, Managing Director (Rating Committee Chair), New York
+1 [phone]
[e-mail]

Van Hesser, Senior Managing Director, New York
[phone]
[e-mail]