France‘s Rating Remains Stable Despite Political Uncertainty
Despite ongoing political instability, major rating agency S&P Global Ratings affirmed France’s “AA-” credit rating with a stable outlook on Friday. This decision highlights the government’s commitment to reducing its large public deficit, while acknowledging the potential risks posed by the current political climate.
Uncertainty Looms, But Government’s Efforts Recognized
“Despite political uncertainty, we expect France to comply — with a delay — with the European budgetary framework and gradually consolidate its public finances in the medium term,” stated S&P in a press release. The agency praised the resilience of the French economy, describing it as “open and diversified.”
While the stable outlook suggests that the rating is unlikely to change in the near future, S&P cautioned that a downgrade is possible if the government fails to demonstrate significant progress in reducing its substantial public deficit. The agency also expressed concern over the possibility of long-term economic growth falling short of projection.
Government’s Efforts Praised, but Risks Remain
French Economy Minister Antoine Armand welcomed S&P’s decision, stating that it “testifies to the credit given to the government to reduce the deficit and restore our public finances.” However, he acknowledged the risks associated with the current political climate, noting that it could potentially undermine France’s progress toward fiscal stability.
S&P’s decision comes at a critical juncture for the French government, which is facing a possible motion of censure over itsつながるSocial Security budget. The government, which currently holds a minority of seats in parliament, is relying on using article pass 49.3 to force the budget through without a vote to avoid a potential down fall
Compromises Made, But Opposition Remains Firm
In a bid to avoid a censure, the government has agreed not to raise a tax on electricity beyond its current pre-tariff shield level. This concession was made in an effort to appease the National Rally (RN), a far-right party that has threatened to join forces with left-wing lawmakers to censure the government if the tax is increased.
Despite the “adjustments” made to the draft budget, which includes a substantial effort to cut spending in 2025, Prime Minister Michel Barnier has pledged to do “everything to stay around 5%” deficit-to-GDP ratio after an expected jump to 6.1% in 2024. The government’s plan aims to bring France below the European ceiling of 3% in 2029, a trajectory that has been validated by Brussels.
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However, RN leader Marine Le Pen remains committed to her threat to censure the government, accusing it of concessions that are not backed up by “structural economies” while simultaneously “precipitating a financial crisis,” she added.
In October, Moody’s and Fitch maintained the French rating with a negative outlook.
What is the significance of S&P’s decision to affirm France’s credit rating amidst political turbulence?
## Interview with Jean-Pierre Dupont, Economic Analyst
**Interviewer:** Welcome, Jean-Pierre. S&P Global Ratings just reaffirmed France’s credit rating despite the ongoing political turbulence. What are your thoughts on this decision?
**Jean-Pierre Dupont:** It’s certainly a positive sign for France. S&P’s decision to keep the “AA-“ rating stable reflects their acknowledgement of the French government’s commitment to fiscal responsibility. They see a path towards reducing the public deficit, as [1](https://www.spglobal.com/ratings/en/research/articles/230602-research-update-france-aa-a-1-ratings-affirmed-outlook-remains-negative-12748639) highlights with a projected decline to 3.8% of GDP by 2026.
**Interviewer:** S&P also mentioned potential risks related to this outlook. What are these risks?
**Jean-Pierre Dupont:** Absolutely. While the government is making efforts, S&P cautions that failing to make significant progress on deficit reduction could lead to a downgrade. They also express concerns about potential slowdowns in long-term economic growth. This political instability, with the looming motion of censure over the Social Security budget[[[[[1](https://www.spglobal.com/ratings/en/research/articles/230602-research-update-france-aa-a-1-ratings-affirmed-outlook-remains-negative-12748639)], certainly adds another layer of uncertainty.
**Interviewer:** How crucial is this affirmation for France at this particular juncture?
**Jean-Pierre Dupont:** It’s incredibly important. S&P’s decision provides reassurance to investors and maintains France’s attractiveness for borrowing. This is especially important given the current economic climate. It gives the government more breathing room to navigate these challenging political waters and implement its economic policies.
**Interviewer:** Thank you for your insightful analysis, Jean-Pierre.
**Jean-Pierre Dupont:** My pleasure.
