The imminence of the European elections did not protect France. After months of suspense, the American rating agency Standard & Poor’s downgraded the rating that assesses the quality of French debt on the evening of Friday, May 31, 18 months after issuing its first warning at the end of 2022 following the Covid-19 crisis. This is the first time France’s sovereign rating has been downgraded since 2013, but the second time in just over a year that one of the three major rating agencies has sanctioned it, after Fitch in April 2023. Downgraded from AA to AA-, the same rating as the Czech Republic or Estonia, the rating remains among the best on the agencies’ scale.

“We remain at a very good rating level,” was the immediate reaction of Finance Minister Bruno Le Maire in an interview with Le Parisien published on Friday evening. “It’s as if we’d gone from 18 to 17 out of 20! Our debt easily finds buyers on the markets. France still has one of the best credit ratings in the world.”

The agency justifies its decision with several arguments: at 5.5% of GDP, the public deficit in 2023 was “significantly” higher than forecast; it does not expect this deficit to fall below 3% by the end of the five-year term, as the government claims; and France’s debt as a proportion of GDP will continue to grow until 2027. “France’s public debt ratio is now the third-highest in the eurozone, behind Greece and Italy,” noted S&P, which also estimates that the interest burden on French debt will rise to 5% of GDP in 2027, from 3.3% in 2023. While acknowledging that the economic environment could improve in the second half of the year, S&P believes that “political fragmentation adds to uncertainty” in France, and limits the government’s ability to act.

‘Sanction’

Opposition parties immediately seized the opportunity to criticize the government’s budget management. “The catastrophic management of public finances by governments as incompetent as they are arrogant has put our country in very serious trouble, accumulating records in taxes, deficit, and debt,” condemned Marine Le Pen, leader of the Rassemblement National (RN, far-right) MPs, on X.

“This is a sanction against the government, which refuses to commit to a significant reduction in public spending and to repaying France’s debt,” said Véronique Louwagie, Les Républicains (conservative) MP, who expressed her readiness to propose solutions and challenge the government. The chair of the Assemblée National’s Finance Committee, Eric Coquerel of La France Insoumice (LFI, radical left), said the decision “won’t change anything economically or financially,” but feared it would be used to “justify further budget cuts,” pointing to “lower revenues and tax benefits for capital.”

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