France’s financial reputation took a significant blow on Friday, September 12, 2025, as international credit agency Fitch downgraded the country’s credit rating, citing what it described as gross economic mismanagement by the government. The move, which was widely anticipated by markets but still sent ripples through the eurozone, places France’s credit status at its lowest level ever recorded by a major ratings agency, according to TradingEconomics.com. The downgrade underscores mounting concern about France’s fiscal future and highlights a new era of convergence among eurozone sovereign credit ratings—one where the traditional gap between the region’s economic core and its periphery is rapidly closing.
Fitch’s report, analytical but unsparing, laid out a series of red flags for France’s economic trajectory. Chief among these is the country’s rising government debt ratio. The agency projects that France’s general government debt will climb from 113.2% of GDP in 2024 to a staggering 121% by 2027, with no clear sign of stabilization in sight. In fact, France’s 2024 debt ratio stands 15 percentage points higher than in 2019 and is now the third highest among sovereigns in the ‘A’ and ‘AA’ rating categories—a level well above what would typically be expected for its credit status. Fitch’s warning is stark: more downgrades could be on the horizon if the country fails to rein in its borrowing.
“France’s general government debt ratio will continue to rise, reflecting persistent primary fiscal deficits,” Fitch noted in its report. The agency also highlighted a troubling pattern: France has failed to achieve a primary fiscal surplus since 2001, and its headline fiscal deficit has exceeded 3% of GDP in all but three of the past 20 years. Looking ahead, Fitch forecasts that the consolidated French budget deficit will remain above 5% of GDP through 2026 and 2027, even if the government manages to implement annual fiscal-tightening measures of 0.5%. That’s a tall order, especially given the country’s political climate.
Indeed, political instability has become a defining feature of French governance in recent years. Since snap legislative elections in mid-2024, the country has cycled through three different governments, each struggling to forge consensus on tackling the ballooning budget deficit. Fitch ranked this “weak political leadership” as the second most important factor in its decision to downgrade France’s credit rating. “The government’s defeat in a confidence vote illustrates the increased fragmentation and polarisation of domestic politics,” the agency observed. With the 2027 presidential election looming, Fitch cautioned that the window for meaningful fiscal reform is narrowing fast.
This latest downgrade is the third blow to France’s credit standing in 2025 alone. Standard & Poor’s changed the country’s outlook to ‘AA- Negative’ on February 28, while DBRS Morningstar followed suit with a shift to ‘AA (high) Negative’ on March 21. While a negative outlook is less severe than a formal downgrade, the pattern is clear: France’s fiscal path is under intense scrutiny from all corners of the financial world.
The immediate market reaction was telling. On Monday, September 15, France’s 10-year government bond yield rose by 7 basis points, while the 30-year bond yield climbed 8 basis points as traders digested the news. Though there was a subsequent counter-reaction, the episode served as a reminder of how quickly borrowing costs can escalate when investor confidence wavers. For now, France has avoided a full-blown spike in debt costs, but if the pattern of repeated downgrades seen during the eurozone debt crisis of the early 2010s repeats itself, the pressure could mount rapidly.
Yet, as Reuters pointed out, the French downgrade was only half the story in a week that also saw Spain upgraded by S&P Global to A-plus. Spain, now the fourth-largest eurozone sovereign bond market with about 1.8 trillion euros outstanding, has been enjoying robust annual growth rates close to 3%—more than twice the eurozone average. This economic momentum has helped reduce Spain’s debt-to-GDP ratio, with the “denominator” effect of strong GDP growth doing much of the heavy lifting. Portugal, too, was recently upgraded to single-A by Fitch, and Italy’s risk premium over French debt has almost vanished, with Italian 10-year bond yields now at historic lows relative to France’s.
In a reversal of fortune from the eurozone crisis 18 years ago, the difference in credit quality between the region’s core economies—like Germany and France—and its so-called periphery has diminished significantly. Germany, the Netherlands, Ireland, and Luxembourg are now the only eurozone countries to maintain at least one AAA rating from the three main credit firms, but even Germany’s top-tier status could be at risk as it pursues fiscal expansion and increased defense spending. The eurozone’s weighted average sovereign credit rating is now gravitating towards a high single-A, reflecting a broader global trend of deteriorating public credit ratings.
Despite the alarmist headlines in Paris, some analysts caution against painting France’s situation as a full-blown crisis. “France’s problem is primarily political, not financial. France is not a bankrupt state likely to drag down its neighbours,” wrote Michaël Nizard, Head of Multi-Asset at Edmond de Rothschild Asset Management, as quoted by Reuters. The country’s current account is balanced, its savings rate hovers near 20%, and inflation remains low. Credit default swap markets had already priced in an A-plus rating for France before Fitch’s announcement, suggesting that the downgrade was largely anticipated by sophisticated investors.
Moreover, the average 10-year yield premium on all euro government debt over just its AAA-rated segment is now only 47 basis points, down 30 basis points from the peaks of 2022 and 20 basis points tighter than a decade ago, according to European Central Bank data. Spain’s risk premium over Germany is at its lowest in nearly 17 years, and Italy’s is at a 16-year low. This tightening of spreads underscores the extent to which the “core versus periphery” narrative has faded from the eurozone’s sovereign debt markets.
Yet, challenges remain. The European Central Bank’s ability to step in as a stabilizing force is more limited now than it was during the last crisis, owing to the abundance of liquidity still present from the pandemic-era stimulus and earlier interventions. Any renewed effort to prop up over-indebted governments by buying their bonds risks fueling inflation—a risk the ECB can ill afford to ignore.
For France, the road ahead is fraught with uncertainty. Without decisive political action to address its structural fiscal imbalances, further downgrades and rising borrowing costs seem all but inevitable. Meanwhile, the rest of the eurozone is moving toward a new normal—one where single-A credit ratings are the benchmark and joint borrowing may become more attractive, even for the most fiscally conservative members.
The fate of France’s credit rating now hinges as much on politics as on economics. Whether the country’s leaders can muster the resolve to chart a sustainable fiscal course remains to be seen. But one thing is clear: the era of sharp divides between Europe’s core and periphery is over, replaced by a more level—if still uncertain—playing field.