Fitch downgrades France’s economic outlook from stable to negative

The Fitch ratings agency on Friday maintained France’s credit rating at A+ but downgraded its outlook from “stable” to “negative” as it raised new concerns over the cost of paying for the country’s debt mountain.

The US agency predicted that the debt level for the EU’s second biggest economy would rise from nearly 115.7 % of GDP in 2025 to 124% in 2028. Its last review in August had forecast that France’s debt would reach 122.7% of GDP in 2028.

“Weaker growth, renewed fiscal deterioration and higher yields have increased the challenge of delivering the necessary sustained fiscal consolidation to arrest France’s worsening debt trajectory,” it said.

International investors have expressed widespread concern over France’s debt level and this has pushed up the interest yields it pays to service debt, which is one of the highest in Europe.

The country will hold a two-round presidential election in April-May next year, and Fitch said the prospects for debt reduction after the vote were “uncertain”.

It said the political divisions, with far-right and far-left candidates leading opinion poll surveys, would make it difficult to agree “a credible fiscal strategy”.

“The emerging policy debate ahead of the presidential election has not materially strengthened Fitch’s confidence in the prospects for durable deficit reduction that could lead to debt stabilization. Large protests over public services and living costs further complicate the social context for fiscal consolidation,” it commented.

The Fitch assessment came after the INSEE national statistics agency reported Friday that the economy has not grown so far this year and contracted in the period from July to September.

The government is also struggling to get parliament to pass its budget, aiming for a reduction in spending, for 2027. This has compounded market fears.

“If we fail to achieve the turnaround outlined in the budget, we are headed straight for a wall,” finance minister Roland Lescure warned in a radio interview.