JPMorgan sees 30%-40% chance of more credit rating pain for France amid ongoing political upheaval

Analysts at JPMorgan have warned of a 30%-40% chance that France will see further negative credit rating moves this year, amid escalating political turmoil that has persisted for months, Reuters reported on Tuesday.

Emmanuel Macron’s government suffered a series of downgrades or “outlook” cuts last year as political upheaval, including four different prime ministers over the twelve months, compounded deteriorating finances.

The downgrades left France’s rating at its lowest on record at AA-, or Aa3 on Moody’s equivalent scale. Fitch, which is due to review the country again in mid-March, has its rating on a ‘negative’outlook’—effectively a downgrade warning.

“We see decent risks (30%-40%) of further negative rating actions in France if the government proves unable to deliver a credible fiscal consolidation plan over the medium term,” JPMorgan said in a note published late on Monday, referring to either a full downgrade or an outlook cut.

Speaking to France Inter radio on Monday, Finance Minister Eric Lombard described the country’s budget situation as “serious,” expressing concern over the deficit, and emphasising that businesses were uneasy over the absence of a finalised budget.

Michel Barnier’s government was toppled in December after left-wing and far-right lawmakers opposed his 60 billion euro ($62.43 billion) belt-tightening push to rein in France’s hefty fiscal deficit.

According to the Financial Times, French stocks are on course to deliver their weakest annual performance since the depths of the Eurozone crisis. Moreover, the political turmoil has weighed heavily on the French market, with François Bayrou becoming the country’s fourth prime minister this year.

“So many things are happening at the same time [that] people want to stay away from French names,” said Roland Kaloyan, head of European equity strategy at the French bank Société Générale.

Amid the escalating financial challenges facing the country, a recent survey by sociological service Odoxa-Backbone, commissioned by Le Figaro, indicated that over 60% of the French people support the resignation of President Emmanuel Macron, with 62% of those surveyed describing his presidency as “authoritarian,” which highlights growing public dissatisfaction with his leadership.