France: Snap Legislative Elections Reduce Policy Predictability

Following the results of yesterday's European parliamentary elections, French President Macron announced snap national legislative elections to be held on June 30 for the first round and on July 7 for the second round. In a strained geopolitical context, this brings heightened political uncertainty and the risk of less policy predictability to France, rated AA (high), Stable, just weeks ahead of a major sporting event, the Olympic Games, starting on July 26. Elections, and the accompanying implications coincide with a time of significant importance for France's fiscal trajectory. We would view negatively from a credit perspective delays in repairing the medium-term fiscal outlook relative to current expectations.

Key highlights include:
• French snap legislative elections increase political uncertainty and present a risk to policy predictability.
• Snap elections and government change will take place just ahead of the organization of a major global sport event.
• Upcoming fiscal events, including 2024 new expenditure savings and 2025 budget preparation, are key for France's fiscal trajectory.

“In a strained geopolitical context, French snap elections bring heightened political uncertainty and the risk of less policy predictability to France,” said Mehdi Fadli, Senior Vice President in the Global Sovereign Ratings Group. “Elections now coincide with a time of significant importance for France's fiscal trajectory.”