The Fitch rating agency downgraded France's sovereign rating to A+ on Friday evening, penalizing the country for its persistent political instability and budgetary uncertainties that are hampering the consolidation of its severely degraded public finances.

Opening the autumn reviews of the rating agencies, Fitch draws a severe assessment of the situation of public finances in the second largest economy of the eurozone, four days after the fall of the Bayrou government and the appointment of a new Prime Minister, the third in a year.

Pointing to the "increasing fragmentation and polarization" of politics, Fitch said in a statement that "this instability weakens the political system's ability to implement large-scale fiscal consolidation."

She considers it unlikely that the public deficit will be brought below 3% of GDP by 2029, as the outgoing government had hoped to do to bring France back into line with European standards.

Outgoing Economy Minister Eric Lombard said he took note of the agency's decision.

For François Bayrou, who has repeatedly denounced France's colossal debt, "a country whose 'elites' are leading it to reject the truth is condemned to pay the price."

On the other hand, Eric Coquerel, LFI president of the Finance Committee of the National Assembly, sees this deterioration as the result of "two months of catastrophic discourse on the country's financial situation."

Appointed to Matignon on Tuesday, Sébastien Lecornu is engaged in a race against time to present a 2026 budget on time that can escape the censorship of the opposition, notably that of the Socialist Party, which is demanding a reversal of the pension reform and the introduction of a Zucman tax on the highest net worth.

He also began consulting with social partners, in a tense social climate which will result in an inter-union day of mobilization on September 18.

But according to Fitch, discussions on the 2026 budget are expected to reduce the scale of the fiscal effort, which François Bayrou has sought at €44 billion. This could jeopardize the target of a projected deficit of 4.6% next year: the rating agency expects it to remain above 5% in 2026 and 2027.

- Blocking -

France previously had a rating one notch higher, AA-, with a negative outlook that opened the door to a downgrade. The new rating comes with a stable outlook.

French public finances are among the most deteriorating in the eurozone: debt reached 113.9% of GDP at the end of March (or €3,345.4 billion), and the Bayrou government had expected the deficit to reach 5.4% of GDP in 2025. Although growth could reach 0.8%, the economy is suffering from a general lack of confidence, according to the French statistics institute (INSEE).

According to Fitch, France's debt will continue to rise to 121% of GDP in 2027, "with no clear horizon for stabilization" after this presidential election year, with the continued risk of political deadlock.

Conversely, Fitch welcomed Portugal's debt reduction and S&P Global the economic dynamism of Spain, previously a European low performer, by raising their ratings.

- "A train late" -

The downgrade, which measures France's ability to repay its debt, marks a turning point for the country, even if it should have few immediate consequences for Paris.

By giving it the equivalent of 16/20, Fitch has downgraded it to the lower category, to "upper average" quality, compared to "good or high" previously, which could lead investors to sell their debt securities for less risky investments and lead to rate increases.

This would further increase the interest paid by France to repay its debt, estimated at around 55 billion euros in 2025, while since the dissolution in June 2024, French debt has already been trading at a much more expensive rate than German debt, even exceeding that of Italy for one day, on Tuesday.

But "what really matters is the trajectory of public finances and the State's ability to keep its commitments," emphasizes Lucile Bembaron, economist at Asterès: "the markets have already drawn their conclusions, whereas the ratings seem to be lagging behind."

This downgrade, the second by Fitch since April 2023, may herald a similar move by the two other major global rating agencies, Moody's on October 24 and S&P on November 28.