France Downgraded to A+ Amid Rising Debt and Political Instability

France’s credit rating has been downgraded by Fitch Ratings from AA‑ to A+, the lowest level the country has ever recorded. Fitch cited political instability and uncertainty over the government’s ability to curb mounting debt and the budget deficit as the main reasons. France’s debt now stands at roughly 113 % of GDP, making it one of the highest in the European Union after Greece and Italy. Its deficit is projected at 5.4‑5.8 % this year, well above the EU’s 3 % ceiling.

The downgrade follows the ouster of Prime Minister François Bayrou, who lost a confidence vote on his €44 billion austerity plan. The plan sought to reduce the deficit and debt by cutting public‑sector jobs, curbing welfare, and scrapping two public holidays. Fitch said the defeat “illustrates the increased fragmentation and polarization of domestic politics,” weakening the system’s capacity to deliver substantial fiscal consolidation.

Fitch warned that France’s deficit is unlikely to fall in the coming years and predicted debt will climb to 121 % of GDP by 2027, citing a lack of “a clear horizon for debt stabilization” amid political turmoil. The agency also noted that high taxes and large social‑spending commitments leave little room to stabilize finances, and cautioned that the 2027 presidential race will likely limit the scope for fiscal reforms.

Outgoing Finance Minister Éric Lombard acknowledged the downgrade but stressed that the economy remains strong. He attributed fiscal strain to “too high” interest rates and said that new Prime Minister Sébastien Lecornu is consulting parliament on a budget aimed at restoring public finances.

The downgrade is expected to raise borrowing costs, with France’s ten‑year yield climbing to 3.5 % on Friday—near Italy’s level and among the weakest in the bloc. Higher borrowing costs could increase debt‑service expenses, a development experts warn could have significant implications. Some caution that the downgrade may prompt similar cuts by other rating agencies, triggering forced selling by institutional investors barred from holding debt below AA. The episode has sparked concerns about the broader Eurozone, with some experts warning that French debt could pose a danger to the region’s economic stability.