ISTANBUL
The outcome of France’s snap election is prolonging political uncertainty, raising the risk of legislative deadlock and additional fiscal measures, according to Fitch Ratings.
“While President Emmanuel Macron’s Ensemble centrist bloc might be able to collaborate with parts of the left-wing New Popular Front (NFP) alliance and the centre-right LR, this may not lead to stable government,” the rating agency said Tuesday in a statement.
“Sunday’s second-round vote left the three main political blocs well short of a majority in the 577-seat National Assembly. NFP parties won 182 seats, followed by Ensemble (168), and the National Rally-led (RN) far-right bloc (143),” it added.
Fitch said attempts to build a coalition are now likely but a more fragmented parliament will complicate negotiations as a majority government would require agreement among ideologically diverse parties.
It noted that NFP presented the most expansionary pre-election program of the three blocs, which included reversing the 2023 pension reform and higher social spending that would substantially accelerate a rise in government debt.
The agency expects a budget to be passed, however, there is a high risk it contains additional spending measures.
It noted that general government debt was already at 110.6% of GDP in 2023.
Fitch estimates debt rising to 112% of GDP by the end of 2026, and said, “The prospect of expansionary measures to pass a budget increases the risk that the debt ratio rises faster.”
The general government deficit is forecast to narrow from 5.5% in 2023 to 5.1% in 2024 and further to 4.2% in 2025 and 2026, according to the agency.
Fitch warned there is a risk that France will experience a succession of different governments and new parliamentary elections next year, and said building coalitions is likely to become even more difficult as the 2027 presidential election approaches.
