France credit downgrade: Fitch cuts rating to A+ from AA- in a record low; political turmoil clouds debt outlook

File photo: French President Emmanuel Macron (Picture credit: AP)

France’s sovereign credit rating has been cut by Fitch to A+ from AA-, with the agency warning that public debt will keep rising until at least 2027 unless urgent corrective steps are taken. The move marks the lowest rating France has received on record from a major credit agency, though Fitch maintained a stable outlook for future moves, as per news agency AFP.The downgrade comes at a politically sensitive moment, just days after François Bayrou stepped down as prime minister following a failed parliamentary confidence vote over his austerity-driven budget. Bayrou reacted sharply on X, saying France was “a country whose elites lead it to reject the truth (and) is condemned to pay the price.” President Emmanuel Macron has since appointed Sébastien Lecornu to form a new government, though he faces a divided parliament with little room to push through deep spending cuts.Fitch said the confidence vote defeat showed how “fragmentation and polarisation” in domestic politics weakened France’s ability to deliver fiscal consolidation. The agency added it was unlikely the deficit would be reduced to 3% of GDP by 2029, contrary to earlier government ambitions.France recorded a budget deficit of 5.8% of GDP in 2024 and debt at 113% of GDP, far above eurozone thresholds of 3% and 60%. Fitch now projects debt to climb to 121% by 2027, with no “clear horizon” for stabilisation.Outgoing economy minister Eric Lombard acknowledged the downgrade but insisted on the “solidity” of the French economy. Rising borrowing costs are already evident: French 10-year bond yields reached 3.47% this week, close to Italy’s levels, though Italy carries a much lower rating. Analysts cited by news agency Reuters said the downgrade had largely been priced in, but warned it could spur forced selling of French bonds if other agencies follow suit. Rival rater S&P Global is due to update its assessment in November.For Prime Minister Lecornu, Fitch’s move heightens the challenge of presenting a new budget by early October. To secure support, he may need to soften plans with concessions such as higher taxes on the wealthy or easing pension reforms, though such compromises risk alienating Macron’s centrist base and conservative allies.