France Faces Renewed Pressure as S&P Reviews Public Debt Amid Downgrades

France's public finances are under renewed scrutiny as S&P Global Ratings prepares to issue its assessment of the country's debt quality this Friday, November 28, 2025. This follows a recent downgrade by S&P in October, which reduced France's credit rating from AA- to A+ with a stable outlook—a move that surprised markets and came shortly after Fitch downgraded France in September.

Analysts at S&P expressed particular concern over the uncertainty clouding French public finances. This financial instability has in part been attributed to the government's suspension of a pivotal pension reform that had been adopted in 2023. The halt in implementing this reform has raised questions about the government's capacity to stabilize the national budget.

As of the third quarter, France’s national debt reached €3,345 billion, amounting to 114% of its GDP, underscoring a persistent challenge in reining in borrowing. This high debt level signals that France remains far from achieving fiscal stability despite government efforts.

Against this backdrop, local taxes such as the property tax (taxe foncière) are set to increase in 2026, with approximately 7.4 million homes affected. The average rise of €63 per property is expected to yield an additional €466 million for local authorities, signaling ongoing efforts to bolster public revenues. Moreover, a government investigation is underway to address a significant VAT revenue shortfall estimated between €5 billion and €10 billion, linked to reduced consumption and fraud issues.

These financial pressures coincide with newly adopted social policies, including a birth leave measure allowing parents up to two months off after childbirth. While this progressive policy might reflect social priorities, the broader financial challenges highlight the balancing act facing the French government.

Overall, the financial outlook for France remains precarious. The upcoming S&P evaluation is likely to play a pivotal role in shaping market and policymaker confidence. The combination of elevated debt levels, tax increases, and suspended reforms continues to test the resilience of France's public finances.