France cannot afford to ignore the third credit-rating reduction in less than a year, French Minister of Finance Roland Lescure said.
“Three agencies have downgraded us and we can’t ignore this cloud,” he told Franceinfo on Saturday, speaking just hours after S&P lowered his country’s credit rating to “A+” from “AA-” in an unscheduled move.
“Fundamentally, it’s an additional cloud to a weather forecast that was already pretty gray. It’s a call for lucidity and responsibility,” he said, adding that this is “a call to be serious.”
Photo: AFP
The credit assessor’s move means France has lost its double-A rating at two of the three major credit firms in little more than a month, potentially forcing some funds with ultra-strict investment criteria to sell the country’s bonds.
The downgrade caps a week that saw French Prime Minister Sebastien Lecornu suspend President Emmanuel Macron’s flagship pension reform to stay in office, allowing him to survive a no-confidence motion.
`That brought some respite from a political crisis that came close to another government collapse and triggering snap elections. However, it is unclear what budget would emerge from a parliamentary debate where opposition lawmakers have more leverage to push back against spending cuts and tax increases.
“I’m not deciding the outcome of the match before it’s been played,” Lescure said. “This debate starts on Monday in committee and continues to the end of the year. It’s really up to us, and when I say ‘us’ it’s both the government and the parliament who need to convince observers — rating agencies and financial markets.”
France’s political and fiscal challenges since Macron called elections in June last year have triggered sell-offs of French assets, driving up the country’s borrowing costs. The French-German 10-year bond yield spread — a key measure of risk — rose more than 85 basis points over the past few weeks, from less than 50 before the snap vote.
The premium has narrowed to about 78 since Lecornu survived last week’s no-confidence votes.
“We have submitted a draft budget for 2026 that aims to accelerate the reduction of the deficit to 4.7 percent of gross domestic product, while we are at 5.4 percent this year,” Lescure said. “We are putting in place a budget that allows us to get there, but this budget must be passed in a vote.”
Next year’s fiscal shortfall is just a “first step,” he said. “The absolute objective is below 3 percent of GDP in 2029, and that will allow us to stabilize debt. Of course, that will require efforts, and that’s what S&P is telling us.”
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