France Loses Top-Tier Credit Rating as Political Uncertainty Mounts
PARIS – Fitch ratings downgraded france’s credit rating on Friday,stripping the country of its AAA status for the first time in over two decades,citing a weakening of public finances and escalating political risks. The move reflects growing concerns about the French government’s ability to consolidate its budget deficit and implement necessary reforms amid a backdrop of political instability and upcoming elections.
The downgrade to AA+-accompanied by a negative outlook-signals increased borrowing costs for the French government and could possibly impact investor confidence in the Eurozone’s second-largest economy. This decision arrives as France prepares to comply with revised EU fiscal rules, requiring deficit reduction as required by EU rules, by 2029. The cut underscores the challenges facing president Emmanuel Macron’s management as it navigates a complex political landscape and seeks to maintain fiscal discipline.
Fitch analysts pointed to a larger-than-expected budget deficit and a reliance on debt-fueled spending as key factors driving the decision. they also highlighted the potential for political fragmentation following the recent legislative elections, which deprived Macron’s coalition of an absolute majority, as a source of uncertainty.
Economy Minister eric Lombard acknowledged the downgrade but asserted the French economy remains robust despite its financial and political challenges. Lombard stated that Minister of the Armed Forces Sébastien Lecornu is already engaged in negotiations “to adopt a budget for the nation and continue efforts to restore our public finances.”