S&P Maintains France’s Credit Rating Despite Political Instability and Budgetary Strains

The American credit rating agency S&P announced on Friday, November 29, its decision to maintain France’s sovereign debt rating at “AA-” with a stable outlook. This decision comes amidst a context marked by political uncertainty and a deteriorating public deficit.

A Reprieve for France

Following recent warnings from Moody’s and Fitch, S&P’s decision provides a temporary respite for France. According to the agency, “despite political uncertainty, we expect France to comply – albeit with delays – with the European budgetary framework and to gradually consolidate its public finances over the medium term.”

The French Ministry of Finance (Bercy) welcomed the decision, which it says reflects the “confidence placed in the government” despite ongoing political risks.

A Pressured Economic and Political Context

This announcement comes as the government navigates turbulent waters. The executive is making multiple compromises to avoid a vote of no confidence, which could be triggered as early as next week, particularly over the Social Security budget. According to the government, rejecting the budget could lead to an economic and financial “storm.”

In this tense environment, Prime Minister Michel Barnier sought to reassure stakeholders. Despite adjustments to the 2025 budget plan—originally projected to include €60 billion in savings—he assured on Thursday that everything would be done to keep the public deficit around 5% of GDP, compared to 6.1% expected in 2024.

A Fragile Economic Legacy

Last May, S&P downgraded France’s rating by one notch, from “AA” to “AA-“, while keeping a stable outlook. Since then, the country’s financial and political situation has become increasingly complex:

• Dissolution of the National Assembly,
• Delayed appointment of a new Prime Minister,
• Widening public deficit.

These factors have heightened tensions in financial markets. Earlier this week, the spread between French 10-year sovereign bonds and their German counterparts—a benchmark for safe-haven assets in Europe—reached its highest level since 2012.

However, Michel Barnier’s announcement to refrain from raising electricity taxes beyond their levels prior to the tariff shield helped to slightly ease these tensions.

S&P’s decision provides a brief reprieve, but the balance remains precarious. France must still address significant challenges to restore its public finances and regain market confidence.