The credit rating agency S&P downgraded France’s rating on Friday, October 17, from AA- to a simple A+ with a stable outlook. S&P cited “high” uncertainty about public finances, despite the presentation of a budget for 2026.
S&P has downgraded the sovereign rating it assigns to France, which falls from AA- to a simple A+, with a stable outlook. How does the American agency explain this downgrade?
The decision was made considering various economic factors. It’s not a surprise in itself because all rating agencies, including S&P, had warned that certain budgetary issues represent challenges for French public finances in the long term.
In its statement, the agency also mentions the French political environment, which creates uncertainty about the possibilities for fiscal consolidation, which it believes will take longer than expected. Finally, S&P estimates that this situation, and the resulting uncertainty, is generating cautious behavior that affects growth. The agency has also revised its growth prospects downward for France to 1% for next year.
Will this decision have consequences for France in the markets?
S&P is only confirming what investors already know. Therefore, it is unlikely to result in a surge in French debt interest rates on Monday morning (October 20) when the markets open. Nevertheless, it can be important in the medium and long term, because experts and investors are closely monitoring France’s budgetary direction.
Interest rates on French debt could therefore be expected to rise, and with them, the cost of public debt for the state budget. Concretely, the billions of euros devoted to interest payments will continue to increase at the expense of other more useful spending in education, defense, justice, or the ecological transition.
S&P caught everyone off guard, including the government. The agency was initially supposed to announce its rating for France at the end of November. How can this early move be explained?
Rating agencies reserve the right to alter their ratings at any time when sig