Rating agency Fitch changed its outlook on France to negative in an unscheduled decision, citing weaker growth, higher borrowing costs, and a wider deficit. The move came shortly after data revealed the Eurozone's second-largest economy unexpectedly contracted by 0.1% in the third quarter. Fitch maintained the country’s A+ rating but highlighted persistent political fragmentation and a challenging social backdrop as obstacles to fiscal consolidation.
The deterioration surprised economists and intensifies pressure on the government to pass a deficit-reducing budget for 2027. Finance Minister Roland Lescure emphasized the necessity of restoring public finances, aiming to reduce the deficit to 5%. Investors remain increasingly concerned as France’s debt approaches 120% of GDP, with 10-year sovereign bond yields hovering around 5%.
Fitch is now the most pessimistic of the three major rating agencies, with S&P maintaining a stable outlook and Moody’s holding a negative outlook one notch above. Weeks of protests over education funding and the cost of living continue, testing the government’s resolve amidst high political strain and economic uncertainty.
Source: Financial Times Markets · Summarized by HeadlinesBriefing