S&P likely to raise growth forecast for France and euro zone

French President Emmanuel Macron arrives to attend a news conference at the Elysee Palace in Paris, France, on June 12, 2017.
French President Emmanuel Macron arrives to attend a news conference at the Elysee Palace in Paris, France, on June 12, 2017. PHOTO: REUTERS

PARIS • Rating agency S&P Global Ratings said it was likely to raise its growth outlook for France and the euro zone, now that President Emmanuel Macron's party looks poised to win a huge parliamentary majority, allowing him to push through the pro-business reforms he promises.

Dr Jean-Michel Six, S&P chief economist for Europe, the Middle East and Africa, said that would remove the political uncertainty that was hanging over France during the election campaign, while Germany looked set to emerge from its September federal elections with a stable government.

"The two biggest countries in the euro zone will emerge from 2017 reinforced politically and economically; that's huge," Dr Six said yesterday.

France is Germany's second-biggest trading partner, and the strong support for pro-European centrist reformer, Mr Macron, has sparked hopes that Berlin and Paris will spearhead a broad-based economic revival in Europe and a push for more integration in the euro zone.

German Chancellor Angela Merkel and Mr Macron agreed last month to draw up a road map to deeper EU integration and suggested the bloc's treaties may change to facilitate even more ambitious reform.

The finance ministers of both countries, Mr Wolfgang Schaeuble and Mr Bruno Le Maire, have set up a joint working group that will present ideas by next month on deepening euro zone integration.

Germany's Deputy Finance Minister, Mr Jens Spahn, said he hoped that Mr Macron would now be able to quickly implement reforms that would boost growth in France's economy.

"If we can help in this regard, we will certainly help," Mr Spahn told Deutschlandfunk broadcaster.

Mr Spahn, a senior member of Dr Merkel's conservatives, said Berlin was open to discuss Mr Macron's proposals for a joint euro zone finance minister and a shared budget in the bloc, but said it was important to first clarify the role and responsibilities.

He repeated Berlin's rejection of a mutualisation of debt within the currency bloc, a step many Germans fear would make Berlin pay for struggling states that resist reform.

However, he said Germany was willing to increase its role in financing investment projects in Europe. "We're open for a lot of things in this regard," Mr Spahn said.

Dr Six said: "We'll likely raise our forecasts for France and the euro zone."

He said S&P's current forecast of 1.5 per cent growth for France this year could be raised to between 1.7 per cent and 1.8 per cent.

REUTERS

A version of this article appeared in the print edition of The Straits Times on June 13, 2017, with the headline 'S&P likely to raise growth forecast for France and euro zone'. Print Edition | Subscribe