Fitch Keeps France at A+, Stable Outlook. The Debt Problem Isn't Going Anywhere

Fitch Ratings announced Friday it's keeping France's sovereign credit rating at A+ with a stable outlook, according to Euronews and multiple French outlets tracked by Ground News. No downgrade. No change in trajectory, at least not yet.

Fitch already stripped France of its double-A rating back in September 2025, citing political instability after the National Assembly's dissolution touched off a revolving door of prime ministers. The Barnier government lasted 99 days. Bayrou's lasted 270 days. Fitch reaffirmed the downgraded A+ rating again in March 2026. Friday's move is the third straight verdict holding the line, not improving it.

Economy Minister Roland Lescure "takes note of the decision" and says the government "remains fully mobilized to contain the public deficit and the debt," according to Ground News. Fitch itself credited France's "large and diversified economy," a "strong banking sector" and a "diversified investor base" for the stable call.

The Numbers Aren't Good

Hadrien Camatte, senior economist for France, Belgium and the eurozone at Natixis CIB, told Euronews the status quo was "the most likely scenario" going into Friday's decision, though he didn't rule out a shift to a negative outlook. His colleague, rates strategist Théophile Legrand, has been watching the same numbers deteriorate since March.

Growth forecasts keep getting cut. Fitch was projecting 1% growth for 2026 back in March. The French government has since dropped its own forecast to 0.7%. Natixis CIB is even more pessimistic, at 0.6%. Then Friday morning, INSEE data came in worse than that: French GDP was flat in the second quarter, not the 0.2% rebound INSEE had originally projected. INSEE blamed a sharper-than-expected drop in agricultural output tied to the summer's heatwaves and drought.

Lescure called it "the first concrete impact of the dreadful summer we've just been through," per Euronews.

On the deficit, Fitch is forecasting 4.9% of GDP, close to the government's own 5% target. Natixis CIB thinks it'll land at 5.1%. Camatte and Legrand's read: these numbers "leave no fiscal room for manoeuvre to reduce it over the coming years." Public debt is projected to keep climbing until at least 2030, with interest costs rising sharply along the way.

Markets Aren't Waiting for Fitch to Panic

Investors didn't wait for Friday's announcement to get nervous. The CAC 40 dropped 1.7% Thursday to close at 8,319, its lowest level in over a month, according to TradingView. Financial stocks got hit hardest: BNP Paribas fell 4.8%, Société Générale dropped 5%, Crédit Agricole lost 4%. Engie shed 3.4%, Vinci fell 3.9%. Pernod Ricard dropped 4.6% on separately reported weak FY2026 sales.

The bond market tells the same story. The spread between French and German 10-year bonds, the gap investors demand to hold French debt over rock-solid German debt, has widened for three straight months and is now around 88 basis points, the highest since late 2024, according to Reuters reporting carried by KFGO and The Straits Times. Kevin Thozet of Carmignac, which manages roughly €44 billion, told Reuters he "wouldn't be surprised" to see that spread hit 100 basis points and keep climbing. French bond yields have already climbed above Italy's, despite Italy carrying a heavier debt load. That's a signal investors trust Italy's political system to manage its debt more than they trust France's right now.

The Real Fight Is Still Ahead

Fitch's Friday decision buys Lecornu's government breathing room, not a solution. The actual test comes in October, when the 2027 budget bill hits the National Assembly, a hung parliament where Lecornu has no majority and two of his predecessors already got ousted trying to pass budgets.

Lecornu has promised "big savings measures" and warned lawmakers not to "add budgetary uncertainty to all the others," per Reuters. Lescure has floated freezing part of France's pension spending to save money, though he hasn't offered specifics.

Complicating everything: France's presidential election is set for two rounds on April 18 and May 2, 2027, and Reuters reports the frontrunners are a hard-left candidate and a far-right candidate, both running on expensive platforms. Neither profile suggests deficit discipline is coming regardless of who wins. Investors and analysts are reading the same platforms voters will choose from and concluding neither leading option addresses the debt trajectory Fitch flagged.

Fitch itself warned in March that a "lasting increase" in France's debt-to-GDP ratio, driven either by failed fiscal consolidation or persistently rising financing costs, would be the key factor determining any future rating move. Both risks are live. The next real checkpoint isn't another Fitch review. It's whether Lecornu's government can get a 2027 budget through a fractured parliament in October without becoming the third government this cycle to collapse over it.