Fitch Ratings, USA News (Paris, France): Rating agency Fitch Ratings kept France’s sovereign debt rating at A+ on Friday but lowered the outlook from stable to negative, citing a deterioration in the budgetary situation and rising borrowing rates.
“Weaker growth, further fiscal deterioration and higher yields have increased the difficulty of carrying out the sustained fiscal consolidation needed to stem the trajectory of France’s deteriorating debt,” the agency stated in a press release, confirming that the rating remains at A+ for upper-medium grade debt.
French borrowing costs have surged in recent weeks amid concerns regarding debt sustainability and ongoing political and social divisions within the country.
A Responsible Budget and Economic Slowdown
In a response issued via press release, Economy Minister Roland Lescure stated that the evaluation “confirms the absolute necessity of adopting a responsible budget by the end of the year, which aims to restore public accounts by reducing our deficit to 5%.” He added that the government remains determined to pursue a path of fiscal consolidation.
Earlier on Thursday, Roland Lescure acknowledged that the French economy had ground to a halt following third-quarter gross domestic product figures that showed a 0.1% decline, following stagnation in the second quarter and a contraction in the first.
Debt Dynamics and Market Sentiment
Fitch Ratings previously assessed France at the end of August, maintaining both the rating and a stable outlook while pointing to a resilient French economy. However, the agency noted a subsequent deterioration in debt dynamics.
“Yields on French government bonds have risen markedly since our last review, in the broader context of a market repricing, but much more sharply than for most peers, indicating increased sensitivity to shifts in market confidence,” the agency explained.
On the debt market, the interest rate on the 10-year French government bond closed at 4.97% on Friday, compared to 4.91% the previous day. The previous week, it had crossed the symbolic 5% threshold.
“Persistent political fragmentation and a difficult social context increase the complexity of implementing sustained fiscal consolidation,” Fitch Ratings observed. Nevertheless, the agency noted that France’s rating continues to be supported by the size, wealth, and diversification of its economy, the strength of its institutions, its euro zone membership, and the resilience of its banking sector.
