S&P, the bigwig of credit rating agencies, just took France’s economic health down a notch from AA to AA-, signaling a not-so-rosy future. This downgrade is like a dark cloud over French economy as investors and organizations, will be now less likely to cozy up with France, pushing its economy into rough waters.
France’s economy is already limping from the Ukraine-Russia crisis, with industries grappling with energy shortages after the blow-off of Nord Stream pipeline. The S&P report is likely to scare off investors and banks from offering favorable policies and funds. This economic squeeze is a golden opportunity for the right wing to gain traction, further loosening Macron’s shaky grip on France.
Emmanuel Macron, already not Mr. Popular after that controversial pension reform, his unwavering support for Ukraine, now his reputation is even more tarnished.
S&P Global is a leading provider of financial information, analytics, and services. S&P Global Ratings is one of the most recognized credit rating agencies worldwide. S&P Global just tossed a curveball at France, knocking its credit rating down a notch from AA to AA-.
Once hailed as the economic superhero, Macron’s now feeling the heat as France’s money troubles pile up. From a deficit hovering around 5.5% of GDP in 2023 to a projected 4.9% for the next couple of years, the numbers aren’t exactly painting a pretty picture. The debt-to-GDP ratio – it’s ballooning past 110%, making France the not-so-proud owner of the third-largest debt load in Europe. In 2020, France’s GDP (Gross Domestic Product) experienced a historic plunge of 7.9%, much steeper than the Eurozone average of 6.6%.
Macron’s economic playbook is under the microscope, with critics lining up to take shots at him and his centrist crew. From pandemic-induced lockdowns to sky-high energy prices fueled by its support to Ukraine, France’s economy is hitting. The disruptions in the supply chains are wreaking havoc, causing shortages and driving prices through the roof. Blow-off of Nord Stream has aggravated the difficulties for France, halting industrial France.
The Ukraine conflict has folks worried about food security too, as France relies on Ukraine for a hefty chunk of its wheat and agricultural goodies. Macron’s talk of sending troops to Ukraine is not exactly winning him any popularity contests as domestic issues are not being addressed and at a time of domestic turmoil, he is thinking of sending troops abroad. At the onset of his presidency in 2022, the French leader enjoyed polling figures exceeding 40%, which have since dwindled to around 30%. Macron’s pension reforms further declined its popularity and caused great stir in the capital. Meanwhile, the protests in New Caledonia are putting even more strain on domestic politics and the government’s budget. As tensions simmer in the territory, Macron’s administration is feeling the heat back home, with the fallout likely to have far-reaching implications for both domestic and international affairs.
Centrist politicians like Macron are stuck between a rock and a hard place, juggling global conflicts and economic stability like a circus act, prioritizing the former without fixing the latter which will inevitably affect its global image.
Banks may hesitate to extend loans, and if they do, the terms could be less favorable, adding to the financial strain. Likewise, investors and multinational corporations might think twice before launching new ventures in an economy that appears to be on shaky ground. This reluctance could hamper France’s ability to support countries like Ukraine and sustain territories such as New Caledonia, as financial resources become scarcer.
In essence, the ripple effects of the credit rating downgrade extend far beyond mere numbers on a financial report. They have the potential to shape France’s ability to navigate global challenges and fulfil its commitments on the international stage.
Initially acclaimed as a skilled technocrat and ex-investment banker poised to steer France’s economy smoothly, Macron now finds himself at the midpoint of his presidency with France seemingly teetering on the brink of bankruptcy. The downgrade from AA to AA- is a stark reminder of the shifting global landscape, particularly for a G7 nation like France.