Fitch Ratings downgraded France’s fiscal outlook from “stable” to “negative” on Friday, while keeping its sovereign debt rating at A+.
The agency cited weaker growth, higher borrowing costs, and a widening deficit as reasons for the change. France’s GDP fell by 0.1% in the third quarter, following stagnation in the second and a 0.2% contraction in the first, according to Insee data published the same day. Fitch also pointed to “political fragmentation” and a “difficult social climate,” with mass protests complicating fiscal consolidation efforts .
Finance Minister Roland Lescure said the decision underscored the “absolute necessity” of adopting a 2027 budget by year-end to reduce the deficit to 5%. He warned that without a budget, France would be “heading into the wall” and reiterated the government’s determination to stay on a fiscal consolidation path .
Fitch analysts expect the budget to pass using constitutional mechanisms, such as Article 49.3, which allows adoption without a parliamentary vote unless a no-confidence motion succeeds. The agency noted that political debates ahead of the 2027 presidential election had not increased confidence in a lasting deficit reduction .
Eurobank, in a separate report, warned that France’s fiscal deterioration stems from structural weaknesses, including high public spending and low growth potential. The bank projected the deficit to narrow from 5.4% of GDP in 2026 to 5% in 2027, while public debt rises from 119.3% to 121.7% of GDP .
The downgrade came hours after France’s 10-year bond yields exceeded 5% for the first time since 2002, reflecting investor concerns over fiscal sustainability .
