France’s financial standing took another hit after S&P Global Ratings downgraded the nation’s sovereign credit rating to A+ from AA-, citing ongoing political instability and a lack of clarity in fiscal consolidation plans. The downgrade marks the second loss of France’s double-A rating among the three major agencies within just over a month, putting it on par with Spain and Portugal, and six notches above junk status.
S&P’s move underscores growing concerns over France’s widening deficit and the government’s weakened ability to pass essential budget legislation. The agency noted that “budget uncertainty remains elevated”, despite the recent submission of a 2025 draft budget that aims to reduce the deficit to 4.7% of GDP from 5.4% this year. However, S&P expects the shortfall to narrow only slightly, projecting a 5.3% deficit in 2026.
The downgrade follows months of political tension that have paralyzed fiscal reforms. France’s new Prime Minister, Sébastien Lecornu, has struggled to unite a fragmented parliament after two predecessors were ousted over budget disputes. His recent decision to suspend President Emmanuel Macron’s pension reform appeased opposition lawmakers but added billions to future spending pressures.
Finance Minister Roland Lescure acknowledged the downgrade as a “call to be serious,” reiterating the government’s goal to bring the deficit below 3% by 2029. Meanwhile, the French-German bond yield spread, a key risk gauge, has widened sharply since Macron’s 2024 snap elections, reflecting rising investor caution toward French assets.
S&P warned that further downgrades remain possible if economic growth slows or the government fails to deliver credible fiscal restraint.