France is facing a wave of economic and political turbulence as its private sector contracts, its credit rating slips, and its leaders struggle to chart a clear path forward. On October 24, 2025, a series of developments cast a spotlight on the mounting fiscal and political uncertainty gripping Europe’s second-largest economy, with analysts, credit agencies, and political commentators all sounding the alarm.
The latest data from S&P Global delivered a jolt to economists and policymakers. The Composite Purchasing Managers’ Index (PMI), which measures the health of the private sector, fell to 46.8 in October from 48.1 in September. A reading below 50 signals contraction, and this drop was both unexpected and sharper than analysts had predicted. According to S&P Global, the services sector was the main drag, recording its worst performance since February 2025. This decline underscores just how vulnerable France’s economy is to the broader uncertainty swirling around its political and fiscal landscape.
The root of that uncertainty? Political wrangling over the national budget. Lawmakers have been locked in heated debates, struggling to reach consensus on how to address France’s growing debt and deficit. The prolonged impasse has left businesses and investors on edge, with many now questioning whether the government can implement meaningful reforms. As one observer put it, “The last couple of months have just been evidence of that challenge.”
The political drama reached a crescendo in mid-October, when the administration of Prime Minister Sébastien Lecornu survived two votes of censure in the National Assembly. The government’s survival, however, came at a steep price. In a bid to secure support from the opposition Socialist Party, Lecornu agreed to suspend the controversial 2023 pension reform, which would have raised the standard retirement age from 62 to 64. This move, described by columnist Simon Heffer as a “political bribe,” may have bought the government some time, but it also sent shockwaves through international financial markets.
Standard & Poor’s, one of the world’s leading credit rating agencies, responded swiftly. In October, S&P downgraded France’s credit rating from AA- to A+, explicitly citing the government’s retreat on pension reform as a key factor. The agency warned that if France continues on its current trajectory, its debt-to-GDP ratio could soar to 121% by 2028. Two other major agencies, including Fitch, have already issued similar downgrades in recent weeks. The immediate consequence? France will now have to pay higher interest rates on its borrowing to compensate investors for the increased risk, further straining already stretched public finances.
Moody’s, the last of the big three credit agencies still giving France a AA rating, voiced its own concerns. Speaking to POLITICO in Paris, Moody’s Chief Credit Officer Atsi Sheth said, “We do believe that fiscal consolidation is a goal, but we anticipate that meeting that goal is going to be very challenging.” Sheth pointed to the ongoing political instability as a major obstacle, noting that Prime Minister Lecornu’s public commitment to narrowing the budget deficit—set to hit 5.4% of GDP this year—will be tough to achieve in the current environment.
The broader implications are stark. As France’s credit rating falls and borrowing costs rise, the government faces a difficult choice: either cut public spending or raise taxes. Neither option is politically palatable, especially in a country where many citizens rely heavily on state support. “Unless public spending is reduced, the alternative will be higher taxes, which in turn will further depress wealth creation in a country that desperately needs it,” Heffer wrote. The specter of higher taxes and austerity measures looms large, threatening to sap consumer confidence and further dampen economic growth.
Amidst this turmoil, President Emmanuel Macron has come under fire for his handling of the crisis. Critics accuse him of distancing himself from the hard decisions, instead reappointing a weakened prime minister and stepping back from the fray. As Heffer bluntly put it, “President Emmanuel Macron, however, appears to have a rather different conception of duty.” Rather than taking decisive action—such as calling new parliamentary elections or appointing a more robust government—Macron has chosen to “perpetuate instability by reappointing a weak ally who feels personally obliged to serve, and then stepping back.”
This leadership vacuum has led some commentators to draw uncomfortable parallels with the paralysis of France’s Fourth Republic, a period marked by chronic governmental instability before Charles de Gaulle’s return to power in 1958. “Historians are already drawing parallels between today’s instability and the paralysis of the Fourth Republic. As one observed, at least when things collapsed in 1958, Charles de Gaulle was ready to restore order. Who, today, could play that role?” Heffer asked. The implication is clear: there is no obvious savior waiting in the wings, and France’s current political class appears ill-equipped to confront the scale of the challenge.
Underlying these immediate crises are deeper structural issues that have long bedeviled France. The country’s sprawling state apparatus, with around 35,000 town halls—many serving tiny communes—reflects a broader problem of inefficiency and over-reliance on public sector employment. “Far too many people in France live, in one way or another, unproductively off the state,” Heffer observed. This bloated bureaucracy not only strains public finances but also stifles innovation and economic dynamism. The need for hard economic decisions is becoming increasingly urgent, but the political will to implement them remains elusive.
For now, the outlook remains uncertain. With the private sector contracting, the services sector underperforming, and the government’s fiscal credibility in doubt, France faces a daunting road ahead. The decisions made in the coming months—on spending, taxation, and political leadership—will shape the country’s economic future for years to come. As Moody’s Sheth succinctly put it, the process of fiscal consolidation “is fraught with challenges, challenges that are rising given the political environment.”
France stands at a crossroads, its economic and political fate hanging in the balance. Whether its leaders can summon the courage and consensus needed to steer the country out of crisis remains the pressing question for Europe—and for the millions of French citizens whose livelihoods depend on the outcome.
