Fitch downgrades French debt rating

The dreaded verdict came Friday night, as US markets closed. Fitch downgraded France's sovereign debt rating from AA- (high quality) to A+ (upper average quality).

The measure was adopted as a result of French political instability, following the fall of the second government in less than a year, and the country's manifest inability to clean up its public finances.

The last prime minister to be ousted, François Bayrou, hurt by the rejection of his austerity plan, reacted harshly, implicitly reproaching those who brought him down. "A country whose elites lead it to reject the truth is condemned to pay the price," he wrote on the X network.

"The fall of the government in a vote of confidence illustrates the growing fragmentation and polarization of domestic politics," Fitch Ratings said in a statement. "This instability weakens the political system's ability to carry out broad-based budgetary consolidation," the US agency added, considering it unlikely to be able to contain the public deficit to 3% of GDP, as the Bayrou government intended.

Acting Minister of Economy and Finance, Éric Lombard, attempted to downplay the severity of the blow. He simply "took note" of Fitch's decision, "motivated by the state of our public finances and the political uncertainty, despite the strength of the French economy." Lombard emphasized that the new Prime Minister, Sébastien Lecornu, is in full talks with the political parties to approve a budget for 2026 and "continue efforts to restore our public finances."

According to some experts, Fitch's symbolic loss of its double-A rating makes perfect sense because it made no sense for France to still benefit from such a high rating when other European countries, such as Spain, Portugal, and Italy, which already pay lower interest rates on their debt due to more stringent policies, continued to have a lower rating.

It remains to be seen what effect Fitch's verdict will have on Lecornu's negotiations to avoid falling victim to a vote of no confidence from the left and far right. On the one hand, it's clear that the markets are demanding more discipline from France, but at the same time, if the prime minister wants to survive, he needs to water down his predecessor's austerity plan. This seems an insurmountable contradiction, compounded by the pressure of street protests and a strike called by unions for next Thursday.