S&P reaffirms credit rating for France amid political turmoil

On November 29, 2024, ratings agency S&P announced that it would maintain its credit rating for France, assigning a 'AA-/A-1+' grade with a 'stable' outlook. This decision comes despite ongoing political troubles and a significant debt burden facing the country. S&P's statement highlighted concerns about rising political fragmentation, which has been complicating fiscal governance and caused delays in approving the 2025 budget. Prime Minister Michel Barnier, who leads a minority government, recently made a major concession to the opposition in an effort to strengthen his administration's budgeting process. He announced a reversal of a proposal to increase electricity taxes as part of the budget negotiations, a crucial move to alleviate market jitters regarding the stability of his government. Nevertheless, challenges remain, particularly from the far-right National Rally and a left-wing alliance that continues to push the administration on budgetary matters. Despite these obstacles, S&P expressed a base-case expectation that the French authorities would proceed with the necessary budgetary consolidations over the medium term, aiming to comply with the EU fiscal framework, albeit with delays. The stable outlook reflects an assessment of balanced risks against strengths, suggesting that while political strife persists, there remains an expectation for fiscal responsibility on the part of the government.