According to Reuters, credit rating agency Fitch downgraded France’s sovereign rating from 'stable' to 'negative' on October 30, warning that the deteriorating fiscal situation and political fragmentation are weakening the prospects for stable French debt.
Fitch notes that since the August assessment, France's economic growth has weakened, borrowing costs have risen, and fiscal deficits have expanded. Combined with political divisions, it is difficult to implement continuous fiscal austerity measures.
The yield on French 10-year government bonds reached a record high last week, breaking through 5.14%, with the increase being significantly higher than in other countries. Market sentiment has become more sensitive to changes in France's fiscal situation, the obstacles faced in the budget bill process, and social unrest.
France is the second-largest economy in the eurozone, and its borrowing costs have risen significantly. This rating adjustment increases the risk of further rating downgrades in the future, putting further pressure on its debt prospects.
Fitch Ratings said: "With presidential elections approaching and policy negotiations taking place, this does not significantly enhance Fitch's confidence that France will achieve sustained deficit reduction and stabilize its debt levels."
Fitch Ratings predicts that France's debt ratio to GDP will increase from 115.7% in 2025 to approximately 124% by 2028. Fitch also points out that France has a large economy, diverse industries, a solid institutional foundation, and as a member of the eurozone, these factors continue to support its sovereign rating.
Just a few days before this Fitch action, Moody’s had just completed its rating review of France. It did not downgrade the rating, keeping it at Aa3, with a negative outlook.
Moody's judgment is based on the expectation that France's budget for reducing deficits in 2027 will be approved, and that financing pressures and social tensions will ease in the coming months.
