France Faces Dual Fiscal and Political Crisis as Fitch Downgrades Its Sovereign Credit Rating

Against the backdrop of dual fiscal and political crises, the U.S. credit rating agency Fitch announced on September 12 local time that it has downgraded France's sovereign credit rating from AA- (high quality) to A+ (upper-medium quality).

According to Fitch's assessment, the main reason for the downgrade is France's lack of a credible fiscal consolidation plan supported by a majority.

In 2024, France's fiscal deficit has reached 5.4% of its Gross Domestic Product (GDP); its total public debt amounts to 114% of GDP; and the ongoing political instability has created significant uncertainty around the passage of the 2026 budget.

Economist Eric Dor commented that the downgrade is "logical," as France currently lacks a sustainable path for fiscal consolidation.

Some experts point out that this downgrade could have a dual impact on France's financing environment. Some analyses suggest that the market has long anticipated France's rating downgrade, so the impact on interest rates may be limited. However, other views warn that the downgrade could trigger investment restrictions for some large funds, leading to selling pressure on French government bonds and thereby increasing financing costs.

Currently, France's government bond yields are already higher than those of Spain, Portugal, and Greece, and are only slightly lower than Italy's. According to the Ministry of Finance's projections, France's debt interest expenses are expected to reach €67 billion this year and could exceed €100 billion by 2030, becoming a heavy burden on public finances.