The US rating agency, a top global institution assessing the financial stability of sovereign borrowers, reduced France’s credit rating from “AA-” to “A+”, the lowest level recorded at a major credit rating agency, due to its ability to repay debts.
Fitch also stated that France’s debt levels would continue to rise until 2027 without urgent action, attributing its downgrade to the lack of clear plans for stabilizing debt in the coming years.
This comes after François Bayrou resigned as prime minister following a loss in a parliamentary confidence vote over an attempt to adopt an austerity budget. He had advocated for significant spending cuts to reduce France’s deficit and debt.
Bayrou reacted to the announcement on X, stating that France is “a country whose ‘elites’ lead it to reject the truth (and) is condemned to pay the price”.
The downgrade complicates the task of drawing up next year’s budget for the new prime minister, Sébastien Lecornu, who is likely heading a minority government.
Fitch noted in a statement that the government’s loss in a confidence vote illustrates increased political fragmentation and polarization, which weakens the political system’s capacity to deliver substantial fiscal consolidation.
Some financial experts suggested that the debt market had already accounted for an expected downgrade, but this move is significant because it could trigger others to follow suit, leading to investors being forced to sell French bonds.
Rising yields could translate into higher costs for servicing France’s debt, which Bayrou warned is already at an “unbearable” level.
France’s budget deficit was 5.8% of its gross domestic product (GDP) last year, and its debt was 113% of GDP, compared to eurozone ceilings of 3% for the deficit and 60% for debt.
“Fitch projects debt to increase to 121% of GDP in 2027 from 113.2% in 2024, without a clear horizon for debt stabilisation in subsequent years,” the agency reported.
“France’s rising public indebtedness constrains the capacity to respond to new shocks without further deterioration of public finances,” Fitch added.
Despite this, France is still aiming for cautious economic growth this year. The INSEE national statistics bureau projected GDP growth of 0.8% for 2025, up 0.1 points from the previous government’s estimate.
Rating agency S+P Global is scheduled to update its own sovereign rating for France in November.
With contributions from Agence France-Presse and Reuters
