On Friday, Fitch Ratings lowered France’s sovereign credit rating as President Emmanuel Macron faces political instability and disputes over managing the heavily indebted public finances.
اضافة اعلان
The U.S.-based agency, a leading global authority on sovereign creditworthiness, downgraded France from AA- to A+ regarding its ability to service debt.
Fitch noted that France’s debt is expected to continue rising through 2027 unless urgent corrective measures are implemented.
Government Crisis
This decision comes just four days after Prime Minister François Bayrou resigned following a lost confidence vote in parliament over his attempt to pass a austerity budget. Bayrou had proposed significant spending cuts to reduce the deficit and public debt.
Bayrou commented on the downgrade via X (formerly Twitter), stating that France is “led by elites who refuse to face reality, and the country will pay the price.”
Challenges for the New Government
The downgrade adds pressure on new Prime Minister Sébastien Lecornu, likely leading a minority government, in drafting next year’s budget.
Fitch stated that the government’s confidence vote defeat reflects growing fragmentation and polarization in domestic politics, which weakens the political system’s ability to implement fiscal reforms. The agency also doubts that France can reduce its deficit to 3% of GDP by 2029, as the previous administration had hoped.
Financial Implications
Credit rating downgrades typically increase the risk premiums investors demand to buy government bonds. Nonetheless, some financial experts noted that markets had already priced in a possible downgrade.
The yield on France’s 10-year government bonds rose to 3.47%, approaching that of Italy, one of the weaker economies in the eurozone.
France’s Budget Situation
Last year, France’s budget deficit reached 5.8% of GDP, while debt stood at 113% of GDP, compared to EU limits of 3% for deficits and 60% for debt. Fitch projects debt to rise to 121% of GDP by 2027, up from 113.2% in 2024, with no clear path to stabilization in subsequent years.
The agency emphasized that “high public indebtedness constrains France’s ability to respond to new shocks without further deterioration in public finances.”
Growth Outlook
France’s national statistics office reported on Thursday that GDP is expected to grow 0.8% in 2025, slightly higher than the government’s previous estimate of 0.7%.
Competitor rating agency Standard & Poor’s is expected to update France’s sovereign rating in November.
