Former Prime Minister François Bayrou, whose government was given a vote of no confidence last week, wrote in this regard that “a country that is forced by its ‘elites’ to deny the truth is doomed to pay the price.”
BFM TV notedthat Fitch’s decision was very predictable. And gave the reasons that led to this decision: the agency considered “unlikely” to reduce the budget deficit to 3% of GDP by 2029, and believes that political instability “weakens the ability of the political system to ensure fiscal consolidation”. And the fall of François Bayrou’s government, “illustrates the fragmentation and growing polarization of domestic politics.”
Economists also consider the downgrade of France’s credit rating by Fitch to be logical, but they are more concerned not about the fact itself, but about the not-so-happy prospects of the French economy. BFM TV cites the opinion of Eric Dore, director of economic research at the IESEG School of Management, who points to “the lack of a credible plan for fiscal recovery, supported by the majority of parliament.” And expresses doubt that political instability will allow to develop and adopt a budget for 2026, capable of reducing the public deficit of 5.4% of GDP and given the size of France’s sovereign debt of 114% of its GDP.
On this basis, Eric Dore argues that France is already regarded “by its creditors as a BBB state” given the rates at which it borrows today.
All of this could lead to the possibility that Fitch’s review of France’s credit rating could have a “threshold” effect on demand for the country’s sovereign bonds from large investors and raise the interest rate, economists say.
In particular, BFM TV explained that “the management rules of many investment funds are very restrictive or even prohibit holding sovereign bonds rated below AA or AAA”. Consequently, a downgrade could lead to net sales of bonds in the market and then a sharp fall on them.
In this regard, economists believe that in the case of France, a credit downgrade could have more significant consequences than in other cases, as it involves denying the country a “very high level of creditworthiness.” And this is bad news for France’s public financial system, given that the debt burden in 2025 exceeds €67 billion. The new circumstances could increase this amount to over 100 billion by 2030.
