Fitch Downgraded France's Credit Rating Outlook Ahead of New Protests
The rating agency noted the growing budget deficit and political instability, which are complicating the country's economic consolidation
Fitch's decision was released on the eve of another round of protests in French cities, including Paris / Photo: Shutterstock
Fitch Ratings has revised its outlook on France's credit rating to negative. This unscheduled decision underscores how rapidly the country's public finances are deteriorating, according to Bloomberg.
Details
Late on the evening of October 30, Fitch changed its outlook on France’s long-term ratings from stable to negative, citing slowing economic growth, rising borrowing costs, and a widening budget deficit. The rating itself was affirmed at A+—one notch below Portugal and Belgium and six notches above “junk” status.
The revision to the outlook reflects “a deterioration in the situation since August 2026, including slower growth, higher borrowing costs, and a widening budget deficit,” according to a statement from Fitch. According to the agency’s assessment, the aggregate fiscal adjustment needed to stabilize the debt has risen to approximately 3.5% of GDP, up from 3.0% in August. At the same time, persistent political fragmentation and a complex social environment complicate the implementation of long-term fiscal consolidation, Fitch notes.
The agency also noted that large-scale protests against public service policies and the rising cost of living are creating additional challenges for fiscal consolidation. Fitch’s decision was released on the eve of another round of protests scheduled for the weekend in French cities, including Paris.
Context
France's economy unexpectedly contracted in the third quarter amid a continuing decline in investment, according to data from the statistical agency Insee. The budget deficit this year is expected to reach 5.4% of GDP.
Prime Minister Sébastien Lecornu has proposed a draft budget featuring strict spending cuts and increased tax revenues to reduce the deficit to 5% next year. However, the bill’s future remains uncertain, as the government lacks a majority in parliament, Bloomberg notes. Opposition forces are unwilling to compromise, focusing instead on the presidential election, which will take place in six months. Leading candidates—ranging from the far left to the far right—are proposing radical policy changes, including lowering the retirement age and significantly raising taxes on businesses.
The spread between French and German 10-year bond yields reached 178 basis points this month, compared with 85 basis points in early September, before the sell-off began. On Friday, it stood at about 165 basis points.
Fitch has taken a proactive stance toward France and its public finances, moving ahead of other major competitors in downgrading its ratings, Bloomberg notes. Moody’s Ratings, which rates France one notch higher, decided last week not to downgrade the country’s rating, while maintaining a negative outlook. At the time, French Finance Minister Roland Lescure called the decision a recognition of “the economy’s resilience and the credibility of the budget presented by the government.” On Friday, the minister struck a more cautious tone: he said that Fitch’s rating “underscores the urgent need to adopt a responsible budget by the end of the year.”
Fitch and S&P Global Ratings had already downgraded France’s ratings in the fall of 2025 amid deteriorating public finances and political uncertainty surrounding the budget. Fitch stated that the situation in the country justifies a “deviation from the schedule” and explains the unscheduled decision. The next scheduled review of France’s rating is expected to be completed by the end of February.
This article was AI-translated and verified by a human editor
