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France’s credit rating downgraded amid political turmoil and rising debt

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France’s credit rating downgraded amid political turmoil and rising debt

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Just imagine, international agency Fitch Ratings has downgraded France’s credit rating to ‘A+’ from the previous ‘AA-’! Nothing seemed to foreshadow this. Although the country continues to experience political instability and rising public debt, it is coping with these challenges. Nevertheless, the rating has been lowered, and that is very disheartening.

The new rating is the lowest in France’s history, even though the outlook remains “stable.” This does little to inspire optimism.

France’s other credit ratings offer little reassurance. Standard & Poor’s rating remains at ‘AA-’ with a “negative” outlook. The best report comes from Moody’s, which assigned France an ‘Aa3’ rating with a “stable” outlook.

This downgrade came just a few days after the resignation of François Bayrou, France’s Prime Minister, whose government lost the confidence of Parliament over an attempt to implement a budget featuring strict austerity measures. Sébastien Lecornu has been appointed as the new Prime Minister.

“The government's defeat in a confidence vote illustrates the increased fragmentation and polarization of domestic politics,” Fitch said. According to analysts, this complicates efforts to limit the annual budget deficit, which under EU rules should not exceed 3% of GDP. Nevertheless, France has exceeded this limit. Simultaneously, the country’s public debt continues to rise, Fitch Ratings underlines. The agency forecasts that by 2027, public debt will rise to 121% of GDP. In 2024, this indicator stood at 113.2%. It should be noted that this figure is twice the median established for countries with an ‘A’ category rating.

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