Fitch Downgrades France to 'A+'; Outlook Stable

France’s long-simmering debt crisis took a sharp turn this week after Fitch Ratings cut the country’s credit rating to A+ from AA-, citing mounting political instability and a deteriorating fiscal outlook.

The downgrade places France one notch below the United Kingdom and on par with Belgium, making Fitch’s assessment the lowest among the major global rating agencies. France now sits just six grades above junk status, a symbolic blow to one of Europe’s largest economies.

“France’s high public debt limits its capacity to absorb new shocks without further deterioration in public finances,” Fitch warned in its Friday statement.

The move caps a tumultuous week in Paris that began with the collapse of yet another government after parliament rejected deficit-reduction plans. President Emmanuel Macron tapped Sébastien Lecornu as prime minister on Wednesday, tasking him with building consensus around a revised budget.

Lecornu pledged to overhaul both the tone and substance of fiscal negotiations. Yet lawmakers remain deeply divided, with many calling for fresh elections just a year after an early vote fractured the National Assembly into three rival blocs. Both far-right and far-left factions have gone further, demanding Macron’s resignation, an option the president has flatly rejected.

Fitch said the government’s defeat in a no-confidence vote illustrates the “growing polarization” of French politics, noting that three governments have fallen since the 2024 legislative elections. The agency cast doubt on France’s ability to reduce its primary deficit to the EU’s target of 3% of GDP by 2029.

France has long struggled to meet its own deficit-reduction goals. Unlike other eurozone members, the country has leaned heavily on debt-financed spending in the wake of successive crises. Fitch now projects France’s budget deficit will remain above 5% of GDP through at least 2027.

If the government fails to pass a budget by year-end, France could enter a restrictive period of “services votés”, when only previously approved expenditures are permitted, leaving little room for fiscal reform or new austerity measures.

The downgrade comes amid waning investor confidence. French 10-year bonds now yield among the highest in the euro area, comparable to Italy, Lithuania, and Slovakia. The spread over German bunds has nearly doubled since Macron called early elections in 2024, underscoring investor unease.

While the Fitch move is unlikely to trigger immediate selloffs, given that France still holds AA ratings from S&P and Moody’s, any further downgrades could force institutional investors bound by strict asset rules to reconsider their exposure.

The credit blow contrasts with recent glimmers of economic resilience. Data this summer signaled the end of a prolonged slump in manufacturing, while the Bank of France reported stronger-than-expected growth in the second quarter.

Still, the national statistics office warned Thursday that ongoing political instability is eroding confidence, with France’s growth expected to lag behind other eurozone peers this year. Fitch forecasts GDP growth of 0.6% in 2025, rising modestly to 0.9% in 2026 and 1.2% in 2027.

Despite these projections, the agency stressed that household savings and corporate balance-sheet strength could cushion consumption and investment in the near term, especially amid easing inflation.