S&P keeps French debt rating but revises outlook down

RATINGS agency S&P on Friday maintained France’s AA- credit score but revised down its economic outlook following pressure on the public finances and political strife over the country’s budget.

That downgrade from stable to negative opens the door to a future demotion of France’s sovereign debt rating from its current high-quality status, which would push up the cost of servicing France’s mounting public borrowing.

With France’s minority government struggling to pass deficit-slashing measures, S&P warned that the “weak political consensus for tackling France’s large underlying budget deficits” was reflected in its revised outlook.

The country’s divided parliament finally adopted a budget on Feb 6 for 2025, after a tumultuous process lasting months which toppled a government and involved several no-confidence votes.

“We could lower the ratings on France if the government cannot reduce its large budget deficits further over the next two years,” the New York-based agency said.

In particular it warned that any weakening of France’s 2023 pension reform - which sparked mass-scale protests across the country - “could create downward pressure on the ratings”.

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S&P also revised its growth forecast for 2025 down to 0.8 per cent from one per cent, warning that the “fiscal strategy beyond 2025 remains uncertain”.

In response, France’s economy ministry told AFP the outlook downgrade “reminds us of the scale of the task of restoring our public finances”.

Fellow ratings agency Moody’s rates France’s debt as Aa3 with a stable outlook, while Fitch puts it at AA- with a negative outlook. AFP