๐ซ๐ท France Downgraded by S&P: What Are the Consequences?
On October 17, 2025, the rating agency S&P downgraded France’s credit rating from AA– to A+, citing growing political instability and persistent budgetary uncertainty. The downgrade follows several votes of no confidence in Parliament, highlighting political gridlock that hinders key reforms, including the pension reform needed to control public debt.
๐ Immediate Economic Impacts
-
Higher borrowing costs: Yields on 10-year French bonds have risen, reflecting increased investor perception of risk.
-
Pressure on public debt: France’s debt could reach 121% of GDP by 2028, up from 112% at the end of 2024, due to slow fiscal consolidation.
-
Investor reactions: Some funds may reduce exposure to French bonds, further increasing the government’s financing costs.
๐️ Political Context and Outlook
-
France faces a period of political fragility, with multiple Prime Ministers since May 2022 and a fragmented National Assembly.
-
Although the government aims for a 4.7% deficit in 2026 and below 3% by 2029, S&P doubts the feasibility of these targets without stronger political will.
๐ Reactions and Implications
-
Authorities have called for parliamentary unity to pass the 2025 budget and restore fiscal credibility.
-
Compared to other European countries, France joins Spain with an A+ rating, while Germany and the Netherlands maintain higher ratings, highlighting a growing gap within the Eurozone.
⚠️ Risks to Watch
-
2027 presidential elections: political uncertainty could persist or worsen.
-
Pension reform: its suspension could compromise deficit reduction efforts.
-
Fiscal consolidation: without additional measures, France may struggle to meet EU deficit reduction goals.
0 Comments