Fitch downgrades France's rating: "There is a risk of interest rates rising"

The Fitch rating agency downgraded France's sovereign rating to A+ on Friday evening, citing political instability and budgetary uncertainties that are weighing on the consolidation of public finances. This decision comes four days after the fall of the Bayrou government and the appointment of a new Prime Minister, Sébastien Lecornu , the third in a year.

In its press release, Fitch points to the "increasing fragmentation and polarization" of political life, which it says "weakens the system's ability to implement large-scale fiscal consolidation." The agency also considers it unlikely that the public deficit will be brought below 3% of GDP by 2029, contrary to the ambitions expressed by the outgoing government.

For economist Stéphanie Villers, this sanction is not a surprise. "We saw it coming, it was expected. Fitch had already explained that it was monitoring France's ability to clean up its public finances," she recalled this Saturday on RMC .

However, the INSEE has revised its forecast for French growth for 2025 to 0.8% instead of the previous 0.6%. There's no need to get carried away, the economist cautions. "Household consumption continues to stagnate. The French are feeling down; they're saving a lot and consuming little. However, consumption is the engine of French growth. As long as it remains blocked, tax revenues won't keep pace, and the deficit reduction target becomes almost unattainable."

As a result, "with this political instability, it is difficult to imagine a return to a public deficit of around 3% of GDP as demanded by Brussels and our European commitments," predicts Stéphanie Villers.

No panic is expected on the markets, however: "The markets had anticipated this; interest rates have already increased. There won't be a sudden shock at the opening on Monday," explains Stéphanie Villers. A gradual rise in rates is, however, to be expected. "French people who are going to borrow for their real estate project risk seeing interest rates rise. Banks are already anticipating these increases and are passing them on to real estate loans. This is also a brake for businesses, which are seeing their borrowing costs rise and are hesitant to invest. This is not a good sign for the economy," analyzes Stéphanie Villers.

A scenario of massive distrust among international investors—which would lead to a massive selloff of French debt and a jump in interest rates—is not on the cards, but "we must keep this risk in mind," warns the economist. "The only way to reassure the financial community is to quickly vote on a clear and credible budget for 2026."

Outgoing Economy Minister Eric Lombard said he "acknowledged" Fitch's decision. François Bayrou once again denounced the "colossal French debt," stating that "a country whose elites are leading it to reject the truth is condemned to pay the price."

On the left, Eric Coquerel (LFI) sees this deterioration as the result of "two months of catastrophic discourse on the country's financial situation."