The freeze of the pensions law until the next presidential election in 2027 was significant concession to the Socialist Party. Retirement reform was considered a flagship achievement for French President Emmanuel Macron.
“Uncertainty on public finances remains elevated ahead of the 2027 presidential elections,” S&P said in its statement. “One example of this is the new government’s decision to suspend France’s landmark pension reform, originally introduced into law in 2023,” it said.
S&P projects France’s economic growth will be 0.7 percent this year, and forecasts a “muted recovery” in 2026.
“Additional risks to our growth forecast are considerable, particularly given the possibility of a pass-through of higher government borrowing costs into the cost of financing for the rest of the French economy,” the rating agency said.
“While, in our view, the 2025 general government budget deficit target of 5.4 percent of GDP will be met, we believe that, in the absence of significant additional budget deficit-reducing measures, the budgetary consolidation over our forecast horizon will be slower than previously expected,” S&P said.
Following the S&P downgrade, French Economy and Finance Minister Roland Lescure reaffirmed the 2025 deficit target and said the draft 2026 budget submitted earlier this week should bring the budget shortfall down to 4.7 percent of GDP next year.
But that will still mean an increase in France’s government debt, which S&P expects to reach 121 percent of GDP in 2028, compared with 112 percent at the end of last year, the rating agency said.
Giorgio Leali contributed reporting.
