France has managed to avoid a second downgrade by major ratings agencies, providing some relief for President Emmanuel Macron as he grapples with the task of stabilizing the country’s debt burden. S&P Global Ratings reaffirmed France’s AA credit rating, citing its robust economy and strong institutions as key factors supporting its creditworthiness. However, the agency maintained a negative outlook, expressing concerns about France’s already elevated general government debt and potential risks to its public finances.
S&P’s decision comes after rival agency Fitch Ratings downgraded France in April to AA-, citing worries about political paralysis and social unrest following a controversial pension reform. To prevent further downgrades, the French government has been actively promoting its commitment to structural reforms, including the recent increase in the retirement age from 62 to 64, which sparked widespread protests.
While S&P acknowledged positive developments such as unemployment benefit reforms and the aforementioned pension reform, it highlighted that French general government debt is projected to remain high, exceeding 110 percent of GDP in 2026. The agency emphasized the need for France to steadily reduce its debt-to-GDP ratio and keep general government interest expenditure below 5 percent of revenue. Failure to address these concerns could result in a downgrade within the next 18 months.
Finance Minister Bruno Le Maire welcomed S&P’s decision, considering it a “positive signal” and affirming the government’s commitment to a clear, ambitious, and credible public finance strategy. Le Maire outlined the government’s goals of reducing public debt to 108 percent of GDP by 2027 and lowering the public deficit to below 3 percent by the same year.
The rating agencies’ scrutiny reflects the pressing challenge faced by President Macron in convincing investors that France can effectively manage its debt burden, which has swelled due to years of crisis spending. Macron aims to reassure both domestic and international stakeholders that the country’s wealthy economy and strong institutions provide a solid foundation for its creditworthiness.
As France continues to grapple with the economic consequences of the pandemic, its ability to rein in public spending and stimulate economic growth will be crucial in determining its future credit rating trajectory. The government’s forthcoming budget savings plan, which includes identifying cutbacks worth 5 percent of each ministry’s budget, will be closely watched.
Macron’s administration must navigate the delicate balance between implementing necessary reforms to address fiscal challenges and responding to concerns voiced by the French people. A recent poll conducted by Elabe for Les Echos newspaper revealed that 70 percent of respondents were worried about Fitch Ratings’ decision to downgrade France, while 76 percent believed it was urgent to reduce public debt.
