S&P downgrades France rating amid ‘political fragmentation’

The global rating agency Standard & Poor’s (S&P) has issued a surprise downgrading of France’s sovereign credit rating from AA- to A+ as the country wrestles with government instability and heavy debt.

Although a draft budget was recently presented, uncertainty remains, S&P said of its decision on Friday evening.

France is experiencing its “most severe political instability” in almost 70 years, said the agency, citing “intensifying political fragmentation” and a turnover of six prime ministers in three years.

The lower rating could lead to higher interest rates on newly issued government bonds, it warned.

Finance Minister Roland Lescure interpreted the move as “a call for clarity and responsibility,” he told Franceinfo radio.

“It is a call for seriousness,” Lescure added, referring to France’s public finances, currently saddled with a €3.3 trillion ($3.85 trillion) debt burden.

“We cannot ignore this cloud, which adds to an already quite gloomy weather forecast,” he stressed.

The eurozone’s second-largest economy now has the same rating at S&P as Portugal and Spain. The agency’s experts still expect the country’s debt to remain high at more than 5% of gross domestic product.

The newly formed French government under Prime Minister Sébastien Lecornu has set itself the goal of reducing this figure from the 5.4% expected for 2025 to 4.7% in the coming year.

By 2029, new borrowing is to be reduced to 3 percentage points of economic output.

With the S&P downgrade, France has lost its double-A rating from two of the three major rating agencies.

Last month, Fitch reduced the country’s credit rating from AA- to A+. Moody’s, which still rates France at Aa3, is due to announce its decision next Friday.