\n<\/p>\n
The Fitch agency downgraded France\u2019s credit rating on Friday, as President Emmanuel Macron struggles with political instability and disagreements on how to put the country\u2019s strained public finances in order.<\/p>\n
The US rating agency, one of the top global institutions gauging the financial solidity of sovereign borrowers, downgraded France on its ability to pay back debts, from \u201cAA-\u201d to \u201cA+\u201d, the country\u2019s lowest level on record at a major credit rating agency.<\/p>\n
It also said France\u2019s debt mountain would keep rising until 2027 unless urgent action was taken, attributing its cut to the lack of \u201ca clear horizon for debt stabilisation in subsequent years\u201d.<\/p>\n
The move comes four days after Francois Bayrou resigned as prime minister after losing a parliamentary confidence vote over an attempt to get an austerity budget adopted. He had sought big spending cuts in the budget to cut the French deficit and debt.<\/p>\n
Reacting to the announcement, Bayrou said on X that France was \u201ca country whose \u2018elites\u2019 lead it to reject the truth (and) is condemned to pay the price\u201d.<\/p>\n
The downgrade will further complicate the task of the new prime minister, Sebastien Lecornu, probably heading a minority government, of drawing up a budget for next year.<\/p>\n
Fitch said in a statement: \u201cThe government\u2019s defeat in a confidence vote illustrates the increased fragmentation and polarisation of domestic politics.<\/p>\n
\u201cThis instability weakens the political system\u2019s capacity to deliver substantial fiscal consolidation,\u201d it added, saying it was unlikely the fiscal deficit would be cut to 3% of GDP by 2029, as the outgoing government had wanted.<\/p>\n
The outgoing economy minister, Eric Lombard, said he had taken note of Fitch\u2019s move and that Lecornu was pushing ahead with consultations with lawmakers to get a budget adopted and restore the public finances.<\/p>\n
A rating downgrade typically raises the risk premium investors demand of a government to buy sovereign bonds.<\/p>\n
Some financial experts had suggested the debt market had already priced in an expected downgrade for France, but the move is more consequential than recent downgrades because it could presage peers to follow suit, potentially leading to forced selling of French bonds by investors bound by ratings thresholds.<\/p>\n
On Tuesday, the return on French 10-year government bonds, known as the yield, rose to 3.47%, close to that of Italy, one of the eurozone\u2019s worst performers.<\/p>\n
Rising yields would translate into higher costs for servicing France\u2019s debt, which Bayrou warned was already at an \u201cunbearable\u201d level.<\/p>\n
Since Macron\u2019s allies in parliament have no overall majority, they will probably have to make compromises that could undermine any drive to slash spending and raise taxes \u2013 with Lecornu\u2019s job possibly also on the line.<\/p>\n
France\u2019s budget deficit represented 5.8% of gross domestic product (GDP) last year, and its debt 113% of GDP.<\/p>\n
This compares with eurozone ceilings of 3% for the deficit, and 60% for debt.<\/p>\n
\u201cFitch projects debt to increase to 121% of GDP in 2027 from 113.2% in 2024, without a clear horizon for debt stabilisation in subsequent years,\u201d the agency said.<\/p>\n
\u201cFrance\u2019s rising public indebtedness constrains the capacity to respond to new shocks without further deterioration of public finances.\u201d<\/p>\n
France is still cautiously targeting economic growth this year. The INSEE national statistics bureau said on Thursday that GDP was projected to grow by 0.8% for 2025, 0.1 points more than the previous government\u2019s estimate.<\/p>\n
Rival agency S+P Global is due to update its own sovereign rating for France in November.<\/p>\n
With Agence France-Presse and Reuters<\/em><\/p>\n","protected":false},"excerpt":{"rendered":" The Fitch agency downgraded France\u2019s credit rating on Friday, as President Emmanuel Macron struggles with political instability and disagreements on how to put the country\u2019s strained public finances in order. The US rating agency, one of the top global institutions gauging the financial solidity of sovereign borrowers, downgraded France on its ability to pay back<\/p>\n","protected":false},"author":1,"featured_media":21339,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[49],"tags":[2575,1049,13090,2213,2918,3824,1913,2657,1999,9992],"class_list":{"0":"post-21338","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-business","8":"tag-credit","9":"tag-debt","10":"tag-downgraded","11":"tag-forecast","12":"tag-france","13":"tag-frances","14":"tag-political","15":"tag-rating","16":"tag-rising","17":"tag-turmoil"},"_links":{"self":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/posts\/21338","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=21338"}],"version-history":[{"count":0,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/posts\/21338\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/media\/21339"}],"wp:attachment":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=21338"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=21338"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=21338"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}