Fitch Moves France's Rating Outlook to Negative on Slower Growth and Deficit

what happened

Fitch Ratings lowered its outlook on France's credit rating from stable to negative. The agency said conditions have worsened since its August review: growth is weaker, borrowing costs are higher and the deficit is wider. Yields on French government bonds have also risen.

Fitch expects interest payments to climb to 3.3% of GDP in 2028 from 2.5% of GDP in 2025, and sees the deficit at 5.5% of GDP in 2027, partly because of possible concessions during the budget process. Public debt is close to 120% of GDP, and the economy contracted in the third quarter. The government expects the deficit to reach 5.4% of GDP this year. Fitch said it expects to review the rating by the end of February 2027 at the latest; no scheduled date has been set.

According to The Wall Street Journal, Moody's kept its Aa3 rating last week but retained a negative outlook amid protests and political instability. S&P lowered France to A+ in October of last year, and Fitch affirmed its A+ rating, citing a large, diversified economy and strong institutions.

why it matters

For markets, this signals rising fiscal risk in France: a larger deficit and debt load could keep a risk premium on government bonds and weigh on the euro during periods of political uncertainty. An outlook cut is not a downgrade, but it leaves less room for error at the next review.

market impact

French government bonds: higher yields on budget risk; euro under pressure from political uncertainty

• ▼French government bonds (OAT) pressure down — higher budget risk and borrowing needs push required yields up
• ▼EUR/USD pressure down — political uncertainty and debt risks in France weigh on the euro

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