The figures appear contradictory. US public debt stands at 123.3% of GDP, compared with 115.9% for France. Nevertheless, rating agencies continue to assign higher ratings to the US: Standard & Poor's rates the US AA+, against A+ for France, i.e. a 3-notch difference.

A Useful but Insufficient Indicator

The debt-to-GDP ratio is the benchmark indicator for comparing national indebtedness. It enables a quick reading, although remains incomplete. It provides information neither on actual repayment capacity, nor on debt structure, nor on investor confidence. Two countries can display a similar ratio while presenting very different risk profiles.

The simplest example is to compare two people who each have €200,000 in debt. If one earns €2,000 per month and the other €5,000, it is quickly understood that their financial strength is not the same. However, many other considerations come into play: assets, salary growth prospects, tax rates, etc. Between two sovereign states, it is the same. The situation of the United States and France cannot be reduced to a simple comparison between debt and GDP.

The American Privilege

The primary advantage of the US is its currency. The dollar is the main currency used worldwide. Central banks, corporations and investors need it constantly. Even in the event of a crisis, there will be buyers.

This situation is reinforced by the fact that they borrow in their own currency. In case of trouble, they can rely on the Federal Reserve to inject liquidity. The dollar depreciates, but this significantly reduces the risk of default.

The situation is different for France. It uses the euro, which is managed by the European Central Bank. It cannot decide to create money on its own. This limits its leeway in the event of a crisis.

Growth as an Engine

Beyond the monetary dimension, economic dynamics play an important role. The debt-to-GDP ratio is a fraction. To stabilize debt, the denominator (GDP) must increase or the numerator (debt) must decrease; it's mathematical.

The United States generally has higher growth than France. Its population is growing faster, its labor market is more flexible and the US economy is highly innovative - particularly in technology - with the rise of AI. This reassures investors, as the country can continue to generate revenue.

"Too Big to Fail"

US bonds also hold a special status. They are considered to be the safest asset in the world. They serve as a benchmark across many financial markets.

In times of crisis, investors do not flee the United States - instead, they seek refuge there. During financial or geopolitical crises, capital flows towards US Treasuries, which lowers their interest rates. Should they default, the global financial system would collapse instantaneously. This is the "too big to fail" insurance; no one would benefit from seeing it fall.

This centrality also rests on the absence of a credible alternative. The Chinese yuan is heavily controlled by the state, which limits its appeal. The euro meanwhile, is based on several countries that have different economic situations, which complicates its role as a safe haven.

Fiscal leeway

The US has fiscal leeway with a tax rate lower that is lower than the OECD average. If they truly wanted to repay, they could raise taxes; this is an implicit guarantee.

France, meanwhile, already has a very high compulsory levy rate, at around 45% of GDP. Increasing taxes further would be economically and politically difficult.

The Only Real Risk: Politics

The most interesting point is that the rare downgrades of the US rating have not all been linked to the economy.

When Fitch Ratings downgraded the US rating in 2023, the primary reason was political. Repeated standoffs in Congress over raising the debt ceiling create a risk of so-called "technical" default.

In other words, the United States has ample means to repay, but its political system could constitute a weak link.

What Rating Agencies Really Look At

Rating agencies therefore do not just look at debt. They assess political stability, the strength of institutions, the credibility of economic policies and a country's capacity to face crises. On almost all of these criteria, the United States benefits from an advantage. France is judged more on its budgetary management, as it has fewer levers.