S&P Downgrades France’s Outlook to Negative

S&P changed its outlook on France’s credit rating to “negative,” citing continued uncertainty over the country’s fiscal position after a prolonged period of political turmoil.

The change in outlook reflects “high government debt amid weak political consensus to address France’s large primary budget deficit, against a backdrop of more uncertain economic growth prospects,” the agency said in a statement late Friday.

S&P kept France’s rating at AA-, seven notches above junk status and in line with the Czech Republic and Slovenia.

S&P’s decision came as France adopted its 2025 budget this month after a bruising parliamentary battle that led to the government’s collapse in December.

The final budget bill aims to cut the deficit to 5.4% of economic output this year from around 6% in 2024, a less ambitious revision than the initial plan to reduce it to 5%.

The French finance ministry said in a statement that the 2025 budget represents a “historic turning point” in efforts to reduce the budget deficit and control debt.

“The negative outlook is a reminder of the scale of the challenge of reforming our public finances, a challenge that the government intends to take up,” the ministry added.

S&P expects France’s gross domestic product growth to fall below 1% this year, adding to the pressure on the fiscal outlook.