France gets budget warning as Fitch turns negative on rating

Paris - France's credit rating has been downgraded by Fitch Ratings to a negative outlook, signaling the country's deteriorating public finances. The downgrade is attributed to weaker growth, higher borrowing costs, and a wider deficit, making debt dynamics worse from a previously weak starting point. The downgrade, announced on October 30, highlights the challenges of sustained fiscal consolidation amid political fragmentation and a challenging social backdrop.

Despite remaining at an A+ rating, France's debt burden has become a significant concern, with yields surpassing those of other developed nations. Fitch's activist stance on France's finances has led to several downgrades in the past, further exacerbating bond market anxiety. Finance Minister Roland Lescure acknowledged the need for a responsible budget, but the uncertainty surrounding the upcoming presidential election and political gridlock has hindered progress.

The economic outlook worsened in October, with output contracting and a projected deficit of 5.4% of economic output in 2026. The debt crisis has intensified, with the spread between French and German 10-year yields reaching 178 basis points, up from 85 basis points at the beginning of September.