Standard & Poor’s (S&P) Global downgraded France’s rating a notch on Friday in a surprise update, warning that political instability put the government’s efforts to repair its finances at risk.
Credit ratings agencies rarely downgrade outside of regulated schedules for updates, but S&P said France’s cut to A+/A-1′ from ‘AA-/A-1+’ was merited after a high-tension week in which Prime Minister Sebastien Lecornu pledged to suspend a deeply unpopular 2023 pension reform and faced two votes of no-confidence.
“We expect policy uncertainty will affect the French economy by dragging on investment activity and private consumption, and therefore on economic growth,” the credit ratings agency said in a statement.
S&P added that the general government gross debt is expected to reach 121% of GDP in 2028, and noted that the ratio was 112% of GDP at the end of last year.
“Additional risks to our growth forecast are considerable, particularly given the possibility of a pass-through of higher government borrowing costs into the cost of financing for the rest of the French economy,” the statement said.
This occurs amid France’s worst political crisis in decades as a succession of minority governments seek to push deficit-reducing budgets through a truculent legislature split into three distinct ideological blocs.
