Fitch expresses concerns over outcome of France's recent snap election

(MENAFN) Fitch Ratings has expressed concerns over the outcome of France's recent snap election, highlighting increased political uncertainty and the potential for legislative deadlock. According to Fitch, while President Emmanuel Macron's centrist Ensemble bloc could potentially collaborate with elements of the left-wing New Popular Front (NFP) and the center-right LR, this coalition may not lead to a stable government.

Following the second-round vote on Sunday, none of the three main political blocs secured a majority in the 577-seat National Assembly. The NFP alliance emerged with 182 seats, followed closely by Macron's Ensemble with 168 seats, and the far-right bloc led by the National Rally (RN) with 143 seats.

Fitch emphasized that efforts to form a coalition are likely underway, but the fragmented parliament poses challenges, requiring consensus among ideologically diverse parties to achieve a majority government. The rating agency noted that the NFP presented the most expansionary pre-election agenda among the blocs, advocating for reversing the 2023 pension reform and increasing social spending, potentially accelerating government debt growth.

Despite expectations that a budget will be passed, Fitch warned of high risks associated with additional spending measures. France's general government debt was already at 110.6 percent of GDP in 2023 and is projected to increase to 112 percent of GDP by the end of 2026. Fitch cautioned that the prospect of implementing expansionary measures to secure budget approval heightens the risk of further escalating the debt ratio.

Regarding fiscal deficits, Fitch forecasts a narrowing trend from 5.5 percent in 2023 to 5.1 percent in 2024, further declining to 4.2 percent in both 2025 and 2026. These projections indicate a cautious optimism regarding deficit reduction but underscore ongoing challenges in fiscal management amid political uncertainties in France.

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