Fitch Ratings, USA News (Paris, France): Rating agency Fitch Ratings maintained the sovereign debt rating of France at A+ on Friday, though it downgraded the economic outlook from stable to negative. The decision highlights a growing deterioration in the nation’s budgetary situation alongside escalating borrowing rates.
In an official statement, the agency noted that weaker growth, further budgetary deterioration, and higher yields have increased the difficulty of achieving the sustained fiscal consolidation necessary to halt France’s worsening debt trajectory.
Rising Borrowing Costs and Political Division
French borrowing costs climbed in recent weeks amid mounting concerns regarding debt sustainability, compounded by internal political and social divisions. Within the debt market, the interest rate on France’s ten-year benchmark bond closed at 4.97% on Friday, shifting upward from 4.91% the previous day. Earlier in the prior week, the rate surpassed the symbolic 5% threshold.
Reacting to the announcement, Economy Minister Roland Lescure stated in a release that the evaluation confirms the absolute necessity of adopting a responsible budget before the end of the year aimed at public account restoration and reducing the deficit to 5%. Lescure added that the government remains resolute in pursuing a path of fiscal consolidation.
Economic Stagnation
Earlier remarks from Lescure acknowledged that the French economy had come to a halt following the release of third-quarter GDP figures showing a 0.1% decline, following a stagnation in the second quarter and an initial contraction in the first.
Fitch Ratings previously evaluated France at the end of August, maintaining both its rating and stable perspective by pointing to a resilient economy. However, the agency observed a subsequent deterioration in debt dynamics. Persistent political fragmentation and a challenging social backdrop further complicate the implementation of sustained budget consolidation.
Despite these headwinds, Fitch emphasized that France’s rating continues to be supported by the large size, wealth, and diversification of its economy, institutional strength, eurozone membership, and the resilience of its banking sector.
