
Fitch cuts France’s credit rating, hints at more to come

After credit rating agency Fitch downgraded France's sovereign credit score to the country's lowest level on record, stripping the euro zone's second-largest economy of its AA- status, there’s mounting speculation that if other agencies follow, it could trigger forced selling on French bonds bound by ratings thresholds. With bond markets watching closely, there’s growing pressure on recently appointed Prime Minister Sebastien Lecornu to find ways to shrink the ballooning debt budget deficit next year from an estimated 5.4% of GDP, when he hands down his draft 2026 budget on 7 October. Fitch attributes its A+ downgrade, the lowest on record for a major credit rating agency, to France’s “high and rising debt ratio” and lack of "a clear horizon for debt stabilisation in subsequent years". In addition, Fitch forecasts that French debt would increase to 121% of GDP in 2027 from 113.2% in 2024. Fitch also warned that “political fragmentation” was hindering fiscal consolidation. "This instability weakens the political system's capacity to deliver substantial fiscal consolidation," Fitch said in a statement. On Monday morning, the yield on France’s benchmark 10-year government bond initially moved 7 basis points higher t