France faces a fresh test of economic credibility after Fitch cut its credit rating, deepening the pressure on a new government already grappling with political turbulence and soaring debt.
France has been dealt a fresh economic blow after Fitch downgraded the country’s credit rating, just as Emmanuel Macron’s government wrestles with political turmoil and the daunting task of getting the public finances back in order.
The US ratings agency lowered France’s sovereign rating from AA- to A+ on Friday, warning that without swift action, the nation’s debt pile will continue to swell until at least 2027.
For Paris, it’s an unwelcome development at a moment of deep political uncertainty.
The downgrade landed only days after François Bayrou dramatically resigned as prime minister, toppled by a parliamentary no-confidence vote over his austerity-leaning budget plans.
Bayrou had sought sharp spending cuts to tame the deficit, but his proposals failed to win over a fractured parliament.
On social media, Bayrou didn’t mince his words, blasting France as “a country whose elites lead it to reject the truth [and] is condemned to pay the price”.
France risks credit downgrade as new PM tackles budget
'Fragmentation and polarisation'
Now the burden falls on new Prime Minister Sébastien Lecornu, who is expected to lead a minority government.
Lecornu must now craft a 2026 budget palatable to MPs from across the political spectrum, while convincing international investors that France can get its house in order.
Fitch was blunt in its assessment, saying the defeat of Macron’s government in the confidence vote was a “sign of increased fragmentation and polarisation” in French politics, warning this instability was undermining the state’s ability to deliver meaningful fiscal reform.
The agency also poured cold water on the idea that France could hit its previous target of cutting the deficit to 3 percent of GDP by 2029.
Still, outgoing economy minister Éric Lombard tried to steady nerves, insisting the French economy remained fundamentally “solid” despite the downgrade.
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Rising costs, rising risks
A lower credit rating often means investors demand higher returns to lend money – and France’s borrowing costs were already climbing. This week, yields on 10-year government bonds rose to 3.47 percent, brushing levels usually associated with Italy, the eurozone’s problem borrower.
Bayrou had already sounded the alarm on debt servicing costs, calling them “unbearable”. France’s debt stood at 113 percent of GDP last year – nearly double the EU’s 60 percent ceiling – while the deficit was 5.8 percent, well above the bloc’s three percent limit.
Fitch now expects debt to climb further, reaching 121 percent of GDP by 2027, with no clear point at which it will level off. That could leave France dangerously exposed to any future shocks, whether economic, geopolitical, or climate-related.
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A little light in the gloom
There are, however, glimmers of hope. The INSEE national statistics bureau nudged up its growth forecast for 2025 this week, from 0.7 to 0.8 percent.
It’s hardly a boom, but it does suggest the French economy isn’t stalling entirely – and growth, however modest, could help ease some of the fiscal pressure.
Markets, too, may not panic. Analysts note that bond traders had long anticipated a downgrade, meaning much of the bad news may already be “priced in”. In other words, the sky isn’t about to fall just yet.
And France isn’t alone in facing the wrath of the rating agencies. Rivals such as S&P Global are set to update their own assessments in November, and many eurozone governments are under scrutiny as they juggle recovery spending with Brussels’ budget rules.
