France’s financial and political landscape was thrown into sharper relief on September 12, 2025, as Fitch Ratings downgraded the country’s sovereign credit rating from AA- to A+, marking the lowest level on record for the eurozone’s second-largest economy. The move, announced by the US-based agency, underscores mounting concern over France’s ability to rein in its ballooning debt and navigate a period of deepening political instability—a storm that has already claimed two prime ministers in less than a year.
The downgrade comes on the heels of a dramatic shakeup in French leadership. Just days before Fitch’s announcement, Prime Minister François Bayrou was ousted after losing a parliamentary confidence vote over his controversial austerity budget. Bayrou’s plan, which aimed to slash spending and reduce France’s deficit, proved too unpopular to survive the National Assembly’s scrutiny. In the aftermath, President Emmanuel Macron appointed Sébastien Lecornu as the new prime minister, tasking him with the herculean challenge of steering a minority government through a fractured parliament.
Fitch’s rationale for the downgrade is blunt: “France’s rising public indebtedness constrains the capacity to respond to new shocks without further deterioration of public finances,” the agency warned in its report, as quoted by France 24. The agency projects France’s debt will climb from 113.2% of gross domestic product (GDP) in 2024 to a staggering 121% by 2027, with “no clear prospect of stabilization in the following years.” The country’s budget deficit, meanwhile, stood at 5.8% of GDP in 2024—well above the eurozone’s 3% ceiling and more than double the level economists say would stabilize the debt.
Fitch’s assessment paints an even grimmer picture for the years ahead. “We expect the run-up to the 2027 presidential election to further limit the scope for fiscal consolidation in the near term, and believe it is highly likely that the political impasse will continue beyond the election,” the agency stated. The report highlights how successive government collapses since the 2024 snap parliamentary elections have weakened France’s ability to implement “far-reaching fiscal consolidation.”
Political fragmentation is at the heart of France’s woes. Bayrou’s failed budget was just the latest casualty of a parliament where no party holds a clear majority. The new prime minister, Sébastien Lecornu, finds himself in a precarious position: to pass a budget, he may need to make concessions to the Socialists, such as raising taxes on the wealthy and softening Macron’s signature 2023 retirement reform. Yet, such moves risk alienating lawmakers from Macron’s own party and the conservative Republicans, adding to the sense that any decisive action will be met with fierce resistance from one faction or another. As France 24 succinctly put it, “the task of passing a slimmed-down budget through parliament is near-impossible, and is what led to the defenestration of France’s last two prime ministers.”
The fallout from the downgrade is not merely political. A lower credit rating typically raises the risk premium investors demand to buy a country’s sovereign bonds, translating into higher borrowing costs. Indeed, the yield on French 10-year government bonds rose to 3.47% on September 9, 2025, approaching levels seen in Italy—long considered one of the eurozone’s most indebted economies. Outgoing Prime Minister Bayrou was frank about the implications, warning that France’s debt had reached an “unbearable” level and that servicing it would only get more expensive if investor confidence continued to waver.
Despite the mounting pressures, officials have sought to project calm. Economy Minister Eric Lombard acknowledged Fitch’s decision but emphasized what he called the “solidity of the French economy.” In a statement on social media, Lombard insisted, “The new Prime Minister has already begun consulting with the political forces represented in Parliament, with a view to adopting a budget for the nation and continuing efforts to restore our public finances.”
There are, to be fair, some bright spots in the economic outlook. According to the French statistics office INSEE, GDP is projected to grow by 0.8% in 2025—a modest but encouraging figure, and slightly higher than earlier government forecasts. Inflation remains among the lowest in the European Union, and the unemployment rate is stable at 7.5%. Fitch itself noted that France’s high household savings rate and solid corporate balance sheets could help support domestic consumption and investment, particularly in the current low-inflation environment. As the agency put it, “current political and strategic uncertainty could weigh on the economic climate, but France’s high household savings rate and solid corporate balance sheets should support consumption and investment.”
Experts interviewed by Euronews echoed the view that, while the situation is serious, France retains significant economic strengths. Hadrien Camatte, senior economist for France, Belgium, and the eurozone at Natixis CIB, explained, “Fiscal consolidation is difficult in a context of political fragmentation and social uprising. Nevertheless, France has several assets: a diversified economy, a more favourable demography than its neighbours, strong household savings and a solid business situation.” Sylvain Bersinger, economist and founder of Bersingéco, was more cautious, noting, “France still has room for manoeuvre, but it is shrinking. The situation could become critical in a few years if the deficit is not reduced. First and foremost, we need to break the political paralysis and pass a budget that will reduce the deficit.”
France’s predicament is particularly stark when compared to its eurozone peers. Germany and the Netherlands remain the highest-rated countries by credit agencies, while Italy and southern European nations continue to struggle with lower ratings due to their own debt burdens. However, as Camatte pointed out, “the outlook of the rating agencies is more positive, unlike that of France.” Notably, S&P Global, another major ratings agency, is expected to update its own outlook for France in November 2025—an event that will be closely watched by investors and policymakers alike.
One quirk of the European financial system is that there is no European agency accredited to rate the debt of EU member countries, due to a lack of consensus among the 27 member states on the assessment criteria. As a result, France’s fate rests largely in the hands of US-based agencies like Fitch and S&P Global, whose pronouncements can move markets and shape the political debate in Paris.
For now, the road ahead looks anything but smooth. France faces the twin challenges of restoring fiscal credibility and forging political consensus in a climate of deep polarization. Whether Prime Minister Lecornu can succeed where his predecessors failed remains to be seen. But one thing is clear: the world will be watching closely as France tries to chart a course out of its current crisis.
