France Hit by Fitch Downgrade as Debt Outlook Worsens

Fitch Ratings has cut France’s sovereign credit rating from AA- to A+, citing deepening political instability and a deteriorating fiscal outlook. 

The agency warned that France’s debt-to-GDP ratio, already at 113.2% in 2024, could climb to 121% by 2027, with little chance of stabilisation before the end of the decade. The public deficit, standing at 5.8% in 2024, remains among the highest in the EU, far above the 2.8% level considered sustainable.

The downgrade comes on the heels of former Prime Minister François Bayrou’s ousting after his austerity-driven budget failed to win parliamentary approval. 

Fitch argued that the succession of governments since the 2024 snap elections has left France unable to pass meaningful fiscal consolidation, making it unlikely to cut its deficit below 3% of GDP by 2029. With the 2027 presidential election looming, the agency expects political paralysis to stay, limiting any near-term tightening of public finances.

What Does This Mean for Me?

Although France is now the eurozone’s third most indebted country after Greece and Italy, the broader economic picture is more mixed. Inflation is among the lowest in the bloc, unemployment holds steady at 7.5%, and GDP growth of 0.8% is forecast for 2025. 

The country’s high household savings rate and solid corporate balance sheets could help sustain domestic demand, even as US tariffs of 15% on EU exports weigh on external trade.

Still, the downgrade highlights the risks investors face as rising debt may eventually filter into higher borrowing costs.