S&P Downgrades France's Credit Rating Amid Heightened Fiscal Uncertainty

Standard & Poor's (S&P) downgraded France's sovereign credit rating from AA- to A+ on October 17, 2025, citing significant concerns about the country's public finances and budget consolidation risks. The agency projected that France's public debt would rise to 121% of GDP by 2028 and forecasted substantial deficits for the next three years. This downgrade follows Fitch's similar action earlier this year, marking the third downgrade by a major rating agency in a year and resulting in France losing its double A status for the second time (105671, 105515, 105673).

S&P highlighted increased political uncertainty, notably the government's suspension of the pension reform initially adopted in 2023, as a factor that may impede economic growth, investment, and household consumption, thereby exacerbating fiscal challenges. Despite the recent 2026 budget proposal aiming to reduce the deficit from 5.4% of GDP in 2025 to 4.7% in 2026, S&P expressed caution that without new deficit reduction measures, the consolidation process could be lengthier than anticipated (105671, 105515).

In response, Economy Minister Roland Lescure characterized the downgrade as an "urgent call for lucidity, responsibility, and seriousness." He reiterated the government's commitment to prudent fiscal management, aiming for a deficit reduction below 3% of GDP by 2029. Lescure emphasized the importance of passing the proposed budget as critical to achieving these goals and stabilizing national debt. The downgrade underscores the sensitive context of France's fiscal outlook and the pivotal role credit rating agencies play in shaping market perceptions and investment decisions (105673, 105658).

The downgrade's timing is significant as the third major rating agency, Moody's, is expected to announce its rating decision on October 24, 2025. Given S&P's influential role in bond markets, this downgrade could affect investor confidence and borrowing costs for France (105515, 105658).