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Bulletin: France's Hung Parliament Is Likely To Complicate Policymaking

This report does not constitute a rating action.

PARIS (S&P Global Ratings) July 8, 2024--S&P Global Ratings believes that the new parliamentary landscape in France (unsolicited, AA-/Stable/A-1+) is likely to complicate policymaking. In our view, the current lack of visibility over the nature of the next government is creating uncertainty regarding the details of its economic and fiscal policy strategy. The 2025 budget, which is due to be presented to the parliament by early October, will give an indication of the new government's willingness to reduce France's large budget deficits and comply with the EU's fiscal rules.

Given the split parliament--in which no party came close to having the 289 seats required to secure an absolute majority--we anticipate that the resulting government will struggle to implement meaningful policy measures and will face a persistent risk of a vote of no confidence. The left-wing alliance has become the largest bloc, the presidential alliance the second, and the far-right the third. Negotiations between party leaders will now determine whether the resulting political impasse can be resolved by forming a coalition government that can survive a motion of no confidence. The president can only dissolve the assembly once every 12 months.

In this context, the next government's approach to public finances, and to economic and budgetary reforms, could be key to determining France's creditworthiness. As stated in "France Long-Term Rating Lowered To 'AA-' From 'AA' On Deterioration Of Budgetary Position; Outlook Stable," published on May 31, 2024, our stable outlook on France reflects our expectations that real economic growth will accelerate and support budgetary consolidation, albeit not enough to bring down its already elevated general government debt-to-GDP ratio. Our 'AA-/A-1+' sovereign credit ratings on France would come under pressure if economic growth is materially below our projections for a protracted period, or if France cannot reduce its large budget deficit and if general government interest payments, as a share of government revenue, increase beyond our current expectations.

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Primary Contact:Remy Carasse, Paris 33-14-420-6741;
Secondary Contact:Marko Mrsnik, Madrid 34-91-389-6953;
Analytical Group Contact:Sovereign and IPF EMEA,  ;

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