What's happened
France's credit rating was downgraded by Fitch from AA- to A+ due to political instability and fiscal challenges. The move follows the resignation of Prime Minister François Bayrou after a confidence vote over austerity measures. The new government, led by Sébastien Lecornu, faces hurdles in passing a budget and stabilizing public debt amid rising bond yields and economic pressures. Today's date: Thu, 18 Sep 2025 18:21:04 +0100.
What's behind the headline?
The Fitch downgrade signals a significant shift in France’s fiscal outlook, driven by political instability and legislative gridlock. The move from AA- to A+ underscores concerns that France will struggle to implement necessary austerity measures amid a fragmented parliament. Fitch warns that debt will rise to 121% of GDP by 2027, with no clear path to stabilization. Rising bond yields, nearing 3.5%, will increase borrowing costs, compounding fiscal pressures. The political deadlock, exemplified by Bayrou’s confidence vote loss, indicates that France’s efforts to meet EU deficit targets are unlikely to succeed soon. This situation risks further credit downgrades, which could trigger a sell-off in French bonds and elevate borrowing costs, impacting economic growth and public services. The upcoming assessments by Moody’s and S&P in October and November will be critical in determining France’s credit trajectory. The broader implication is that France’s fiscal challenges are now intertwined with political stability, making reform efforts more difficult and uncertain.
What the papers say
According to Politico, the political deadlock and legislative fragmentation have directly contributed to Fitch’s downgrade, highlighting the increased difficulty in passing fiscal reforms. Giorgo Leali notes that the move reflects concerns over rising debt and the likelihood of continued political instability, which hampers fiscal consolidation efforts. The Guardian emphasizes that Fitch’s decision was driven by France’s inability to stabilize its debt without urgent action, warning that debt will keep rising until 2027 unless significant reforms are enacted. All sources agree that France’s political landscape is a key obstacle to fiscal stability, with Fitch’s warning about rising bond yields and debt levels underscoring the urgency of resolving legislative gridlock.
How we got here
France is struggling to control its public finances, with a debt of €3.3 trillion and a deficit of 5.4% of GDP. The country’s political landscape has been fractured since President Macron called snap elections last year, leading to legislative deadlock. The outgoing government aimed to reduce the deficit to 4.6% in 2025 and below 3% by 2029, but recent events have hindered progress. Fitch's downgrade reflects concerns over rising debt levels and political fragmentation, which threaten fiscal stability and could increase borrowing costs.
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