New Rating: Fitch cut France’s credit rating from AA- to A+.
Reason: Political instability following repeated government collapses after the 2024 snap elections and uncertainty over controlling public finances.
Debt Outlook: France’s debt is forecast to rise from 113.2% of GDP in 2024 to 121% by 2027, with no clear signs of stabilisation.
Deficit: The 2024 deficit is 5.8% of GDP, well above the stabilising target of ~2.8%. Fitch sees little chance of reducing it below 3% by 2029.
Political Risks: Fitch warned that the run-up to the 2027 presidential election will limit fiscal consolidation, and the political impasse is likely to continue.
Government Response: Finance Minister Eric Lombard emphasized the “solidity” of the economy and the new Prime Minister Sébastien Lecornu has begun consulting parliament on a revised budget.
Economic Context: GDP growth forecast for 2025: 0.8% (slightly above previous forecasts). Inflation: Among the lowest in the EU. Unemployment: Stable at 7.5%. France benefits from a diversified economy, strong household savings, and solid corporate balance sheets.
Eurozone Comparison: Germany and the Netherlands: Highest-rated eurozone countries. Southern Europe (e.g., Italy): Lower ratings due to debt and legacy issues.
Implications: The downgrade may affect borrowing costs, including mortgage interest rates, but economists expect the immediate impact to be limited. S&P Global will review its rating for France in November.
