International rating agency "S&P Global" surprisingly lowered France's credit rating by one notch - from "AA-/A-1+" to "A+/A-1", warning that political instability in the country threatens the government's efforts to reduce the budget deficit, Reuters reported, BTA reported.
Usually, the agencies revise ratings according to a predetermined schedule, but according to "S&P" the recent events in France necessitate an extraordinary update. Last week, Prime Minister Sebastien Le Corneille announced a freeze on the unpopular pension reform from 2023 and survived two no-confidence votes in parliament.
"We expect policy uncertainty to negatively impact investment activity and private consumption, and hence economic growth," the rating agency said in a statement.
A little over a month ago, another rating agency - "Fitch" (Fitch Ratings) - also lowered its assessment of the second largest economy in the eurozone by one notch.
To secure support from the Socialists, the government has backed down on one of President Emmanuel Macron's key reforms, thereby ensuring its temporary survival. Le Corneille's proposed 2026 budget is due to be considered by the French parliament on Monday, with heated debates expected, Reuters added.
Finance Minister Roland Lescure said in response to the downgrade that it was the "collective responsibility" of the government and parliament to adopt the budget by the end of the year to ensure a deficit below 3 percent of GDP by 2029, in line with EU rules.
According to "S" The adoption of the budget would provide greater clarity on the management of the growing debt, which the agency forecasts will reach 121 percent of GDP in 2028, compared to an expected 112 percent at the end of 2024.
However, the agency emphasizes that uncertainty around public finances remains high ahead of the presidential elections in 2027. The rating outlook has been changed from "negative" to "stable".