France’s debt crisis has intensified, prompting Standard & Poor’s (S&P) to lower the country’s credit rating from “AA” to “AA-“. This marks the second downgrade in just over a year and comes just a week before European elections. The French government is facing increasing pressure to address its financial situation and implement reforms to restore confidence in its economic stability.
The latest downgrade by S&P was not unexpected, as the agency had previously warned France about the downgrade if its financial situation did not improve. Despite measures to reduce public debt and pension reform, S&P cited reasons such as lower-than-expected economic growth and political fragmentation in the country for the downgrade.
Economy and Finance Minister Bruno Le Maire attempted to reassure the public by stating that France remains at a high rating level and will not have difficulties finding investors. However, the downgrade indicates a lack of confidence in the government’s ability to solve the debt crisis in the near future.
France’s deficit in 2023 was higher than expected at 5.5 percent of GDP, leading to total debt accumulation of over 3,100 billion euros. This highlights the challenges of President Macron’s economic policies, which aimed to boost growth through tax cuts and business-friendly reforms.
The impact of the downgrade on France’s immediate financial situation is expected to be limited, but borrowing costs have risen significantly due to this move. While France aims to reduce its deficit to 3 percent of economic output by 2027, economists and rating agencies like S&P are skeptical about this goal due to ongoing challenges such as slow economic growth and political instability.
The downgrade comes at a challenging time for Macron, with European parliamentary elections on the horizon. Political opposition has criticized his budget management, highlighting record levels of taxes, deficits, and debts. Additionally, Macron faces limited support in the National Assembly due to opposition motions of no confidence arising from his use of Article 49.3 to pass laws without a parliamentary vote.
To address these challenges head-on, France needs
