S&P Global Ratings downgraded France, dealing another blow to the country’s credibility as a weakened minority government struggles to pass legislation to tackle a swelling debt burden.
In an unscheduled move, the firm cut France to A+ from AA-, saying that the country’s budget uncertainty “remains elevated” despite the submission of a 2025 draft budget.
The downgrade means France has lost its double-A rating at two of the three major credit assessors in little more than a month, potentially forcing some funds with ultra-strict investment criteria to sell the country’s bonds.
At S&P, the country — which has a stable outlook — is now on par with Spain and Portugal, six notches above junk. The next scheduled ratings assessment for France is Moody’s on Oct. 24.
France has suffered a string of ratings setbacks in recent weeks including downgrades from Fitch and DBRS as long-running political instability risks morphing into a public finances crisis.
The National Assembly has evicted two prime ministers in the last year over their budget plans after snap elections split the house into irreconcilable minority groups. The latest premier, Sebastien Lecornu, has only managed to remain in office by ceding to demands from opposition lawmakers for more deficit spending and the suspension of President Emmanuel Macron’s pension reform that aimed to bolster public finances.
The 39-year-old prime minister has also relinquished using a constitutional tool known as Article 49.3 that previous governments relied on to bypass votes on financial legislation. That raises uncertainty over how fractious lawmakers will be able to agree on the 2026 budget by the end of the year at a time when unpopular spending cuts or tax increases are needed to get a grip on a runaway deficit.
The initial draft bill Lecornu submitted to parliament this month targets a reduction in the budget shortfall to 4.7% of economic output from 5.4% this year. But he has said lawmakers have latitude to negotiate a wider objective, so long as the deficit remains within 5% and France can still meet its longer term goal of 3% by 2029.
S&P said it expects next year’s budget deficit to narrow only slightly to 5.3%.
“France is experiencing its most severe political instability since the founding of the Fifth Republic in 1958,” S&P said. “Even if snap parliamentary elections were to be called and produce a clear majority in the National Assembly, there is no guarantee that this would smooth the path for a credible medium-term fiscal consolidation plan or economic reform implementation.”
Acknowledging the downgrade, Finance Minister Roland Lescure reaffirmed the government’s determination to meet this year’s deficit target of 5.4% and said France remains committed to bringing the gap below 3% of GDP by 2029.
He said in an interview with Franceinfo radio on Saturday that the downgrade is a “call to be serious.” The government has proposed a budget to get to 4.7% next year, but he added that must be passed in a vote in parliament.
“I’m not deciding the outcome of the match before it’s been played,” Lescure said. “This debate starts Monday in committee and continues to the end of the year. It’s really up to us and when I say ‘us’ it’s both the government and the parliament who need to convince observers — rating agencies and financial markets.”
France’s political and fiscal challenges since Macron called elections in June 2024 have triggered sell-offs of French assets, driving up the country’s borrowing costs. The French-German 10-year bond yield spread — a key measure of risk — rose over 85 basis points in recent weeks, from less than 50 before the snap vote.
The premium has narrowed to around 78 since Lecornu survived no-confidence votes after pledging last week to suspend Macron’s pension reform that was gradually raising the minimum retirement age to 64 from 62.
Lecornu has said suspension of the pension reform until the next presidential elections in 2027 will cost €400 million in 2026 and €1,8 billion the following year. That, according to the prime minister, must be compensated by savings rather than a bigger deficit.
S&P said it could further lower its ratings on France “if its budgetary position deteriorates beyond our forecast or economic growth prospects worsen significantly.”
