France’s credit rating downgrade kills Macron’s credibility

Last week S&P Global downgraded France’s credit rating from AA to AA-, hammering the final nail in the coffin of the Macron presidency. Emmanuel Macron won as a competent technocrat and a former investment banker who would manage France’s economy with ease. Now, nearly halfway through his presidential term, France appears to be slipping into bankruptcy.

France’s deficit was 5.5% of GDP in 2023, and it is expected to remain high at 4.9% of GDP in 2024 and 2025. The country currently has the fourth largest government deficit in Europe, and at around 110% of GDP, the third largest debt-to-GDP ratio. The Maastricht criteria rules that govern membership of the single currency set an overall debt limit of 60% of GDP and a deficit limit of 3%. Now, France has more than double the allowed debt load and almost double the deficit.

Macron has found himself caught in the same bind as many other centrists in Europe: they state publicly that they want to provide economic stewardship, but they keep getting caught up in economically destructive policies. The two main causes of France’s current woes are the costs imposed, first by the lockdowns, then by the high energy prices driven by the sanctions and counter-sanctions associated with the war in Ukraine.