France's Credit Rating Downgraded to A+ by S&P Amid Fiscal Uncertainty and Political Instability

On October 17, 2025, S&P Global Ratings downgraded France's sovereign credit rating from AA- to A+, marking the third downgrade in a year and intensifying concerns about the country's public finances. This unexpected early downgrade reflects growing uncertainty exacerbated by political instability, including a suspended pension reform and motions of censure in Parliament. S&P warned that without significant fiscal consolidation, public debt could reach 121% of GDP by 2028, and France's borrowing costs may rise due to increased interest rates on government bonds.

The downgrade puts France on a financial footing comparable to Spain and Portugal and continues a decade-long decline from its former AAA rating lost in 2012 during the eurozone crisis. Despite these challenges, the French government remains committed to improving fiscal health. Economy Minister Roland Lescure acknowledged the seriousness of the situation, stating, "We cannot ignore this cloud that adds to an already gray weather report," and outlined plans to reduce the public deficit to 5.4% of GDP in 2025 and further to 3% by 2027. The 2026 budget includes measures such as new taxes on wealth management holdings, extension of surcharges on large corporate profits, and elimination of ineffective tax niches.

Public Accounts Minister Amélie de Montchalin emphasized the vital need for an approved national budget to avoid "a collective impotence" that would hinder crisis management and damage public trust. She highlighted that France will pay an additional €8 billion next year on debt interest—equivalent to the annual budget of the gendarmerie—and stressed the importance of securing sustainable funding for defense, security, education, and health. The government also plans to continue corporate profit surtaxes, albeit reduced in their second year. Montchalin attributed at least €12 billion in economic costs to government instability, underscoring the urgent need for fiscal responsibility and political consensus.

Overall, the downgrade serves as a stark reminder of France’s fiscal vulnerabilities and political challenges as it seeks to reassure markets and stabilize its economic outlook.