In the latest episode of our “Clarity in Credit” podcast series, Arnaud Journois, Senior Vice President of European Financial Institution Ratings, and Jason Graffam, Senior Vice President of Global Sovereign & Financial Institution Ratings, joined Mehdi Fadli, Senior Vice President and Sector Lead of Global Sovereign Ratings to discuss developments regarding the Republic of France.
In the latest episode of our “Clarity in Credit” podcast series, Arnaud Journois, Senior Vice President of European Financial Institution Ratings, and Jason Graffam, Senior Vice President of Global Sovereign & Financial Institution Ratings, joined Mehdi Fadli, Senior Vice President and Sector Lead of Global Sovereign Ratings to discuss developments regarding the Republic of France.
Government instability in France has resurfaced, marked by the resignation of Prime Minister Lecornu on 6 October 2025, though he was reappointed later that week. This latest government collapse is the third since the snap legislative elections in July 2024, highlighting the ongoing instability that France has faced over the past year. On 19 September 2025, we downgraded France’s sovereign credit rating to AA with a Stable trend from AA (high).
Key Highlights
-- The political turmoil also accentuates the uncertainty over France's policy and fiscal outlook. The downgrade of France’s sovereign credit ratings reflects our expectation that the fiscal consolidation path will be more gradual than anticipated in the government’s medium-term fiscal plan amid ongoing domestic political fragmentation and reduced policy consensus.
-- Despite the prevailing headwinds, France’s economy remains resilient. The country’s real GDP growth outpaced the euro area average in 2023–24, underpinned by foreign trade and public spending. Furthermore, labour reforms enacted in recent years have bolstered employment, with the national unemployment rate currently at historically low levels. Even with the potential suspension of pensions reform until 2028, the near-term fiscal impact of the potential suspension seems relatively contained.
-- In the near term, we anticipate two potential scenarios unfolding in France’s domestic political landscape. The second Lecornu government could continue negotiating with some parties in the National Assembly, possibly making new budget concessions to avert a vote of confidence. Alternatively, the government might opt for new snap legislative elections, which could potentially result in more seats for the far-right National Rally party.
-- In the current geopolitical context, the absence of a strong and stable government in France also poses a challenge for Europe, particularly in light of the ongoing war in Ukraine and the increasing military spending among NATO members. The French presidential election slated for 2027, if won by the National Rally, could have significant implications for European Union (EU) member states’ cohesion, their commitments towards the EU, and the EU’s funding and policy objectives.
See our 6 October 2025 commentary, “France: Another Government Collapses, Accentuating Uncertainty on the Fiscal Outlook” at https://dbrs.morningstar.com/research/464260 for additional insight on France from our analysts.
-- Credit Rating Report: Morningstar DBRS Downgrades the Republic of France to AA, Trend Changed to Stable: https://dbrs.morningstar.com/research/462894
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