“A slower growth, a renewed budget deterioration and higher yields have increased the difficulty of pursuing the sustained fiscal consolidation required to halt France’s debt degradation trajectory,” the agency said in a statement, noting that it was maintaining the rating at A+ (upper‑medium‑grade debt).
France’s borrowing costs have surged in recent weeks under the weight of concerns about the sustainability of its debt and the political and social divisions that are splitting the country.
“This assessment confirms the absolute necessity of adopting, by the end of the year, a responsible budget aimed at restoring public finances by reducing our deficit to 5%,” responded Economy Minister Roland Lescure in a statement, noting that “the Government is determined to continue on a path of fiscal consolidation.”
Earlier on Thursday, Roland Lescure had also admitted that “the French economy was at a standstill,” following the release of third-quarter GDP figures, down 0.1%, after stagnation in the second quarter and already a decline in the first quarter.
Fitch Ratings’ previous rating action had taken place at the end of August. The agency had then kept its rating and its outlook, describing the French economy as “resilient.”
But since then there has been a “deterioration in debt dynamics,” notes Fitch Ratings.
“French government bond yields have risen sharply since our last review, within the broader market repricing context, but far more than for most peers, indicating greater sensitivity to shifts in market confidence,” the agency explains.
In the debt market, the yield on France’s 10-year borrowing finished at 4.97% on Friday, up from 4.91% the day before. Last week, it had breached the symbolic 5% threshold.
“Persistent political fragmentation and a difficult social environment increase the complexity of implementing sustained budget consolidation,” Fitch Ratings says.
Nevertheless, “France’s rating remains supported by the size, wealth and diversification of its economy, the strength of its institutions, its membership in the euro area and the resilience of its banking sector,” adds the rating agency.
