France's credit rating downgraded, with debt forecast to keep rising amid political turmoil

"The US rating agency, one of the top global institutions gauging the financial solidity of sovereign borrowers, downgraded France on its ability to pay back debts, from AA- to A+, the country's lowest level on record at a major credit rating agency. It also said France's debt mountain would keep rising until 2027 unless urgent action was taken, attributing its cut to the lack of a clear horizon for debt stabilisation in subsequent years."

"This instability weakens the political system's capacity to deliver substantial fiscal consolidation, it added, saying it was unlikely the fiscal deficit would be cut to 3% of GDP by 2029, as the outgoing government had wanted. The outgoing economy minister, Eric Lombard, said he had taken note of Fitch's move and that Lecornu was pushing ahead with consultations with lawmakers to get a budget adopted and restore the public finances."

Fitch lowered France's sovereign credit rating from AA- to A+, the lowest level recorded by a major agency. The downgrade reflected concerns that public debt will keep rising until 2027 without urgent measures and that no clear horizon for stabilisation exists. Political fragmentation intensified after Prime Minister Francois Bayrou resigned following a lost confidence vote over an austerity budget. Sebastien Lecornu, likely leading a minority government, must now seek support to adopt a budget and restore public finances. The downgrade increases sovereign borrowing costs and makes achieving a 3% of GDP fiscal deficit target by 2029 unlikely.

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