In 2012, during the eurozone crisis, France lost its AAA rating on its public debt, the highest rating assigned by credit agencies. A slow decline began, first within the AA categories, and then, for the past two weeks, within the A category. On October 12 and 17, the agencies Fitch and S&P (formerly Standard & Poor’s) downgraded France to A+, the fifth-highest rating, on par with Spain or Portugal.
We must not misunderstand the causality. Credit rating agencies are merely thermometers, measuring the evolution of France’s public finances. They do not cause panic in the financial markets, which had long since observed the political situation and did not need this reminder.
But what is notable is the language used by the agencies. Despite their measured phrasing, they express reservations about the government’s projections, which claim that the deficit, expected to be 5.4% of gross domestic product (GDP) in 2025, will be reduced to 4.7% in 2026.
Significant Consequences
The agencies consider these projections unlikely. S&P predicts a deficit of 5.3% of GDP in 2026, while Fitch anticipates an increase to “5.5%-5.6%.” They reflect the consensus among economists. Those at Société Générale speak of 5.5%. In short, France faces budgetary challenges with the markets, international investors, and its European partners. The commitment made to Brussels to return to a 3% deficit by 2029 represents a significant objective.
This has important consequences. Not that France risks short-term difficulties. The possibility of an intervention by the International Monetary Fund is considered unlikely. For now, the country continues to finance itself without any problems: every debt issuance finds many buyers. The French have significant savings, the economy remains the seventh largest in the world, and it is diversified.