Fitch issues warning on France’s credit rating – Technologist

Yet another warning for French Prime Minister Michel Barnier. On Friday, October 11, the American credit rating company Fitch decided not to downgrade the rating given to French debt, keeping it at AA- for the time being, but added a “negative outlook” to it. In other words, if the situation is not quickly rectified, if the government’s promises to restore public finances are not kept, the rating could be downgraded at the next review.

The recently appointed finance minister, Antoine Armand, reaffirmed after Fitch’s decision “the government’s determination to redress the trajectory of public finances and control debt.”

For the time being, France’s accounts may appear to be out of control. The public deficit, which was initially planned to return to 4.4% of the country’s gross domestic product (GDP) in 2024 after being wider than forecast in 2023, is now expected to worsen. The government’s major creditors will be satisfied if it doesn’t exceed 6.1% of GDP by the end of the year.

‘Persistent political uncertainty’

The austerity measures in the 2025 budget, which was presented on Thursday, are supposed to represent a first inflection point, and reduce the deficit to 5% of GDP, but many experts have expressed doubts that this target can be achieved. Fitch, meanwhile, has instead estimated that the deficit will stand at 5.4% of GDP in both 2025 and 2026, “reflecting lingering political uncertainty and implementation risks around some of the measures.” The agency is betting that the budget will be passed before the end of the year, “but the government may need to make concessions to secure support from opposition parties.”

Going forward, the government is preparing to negotiate with Brussels to postpone the date by which the deficit should return to below the 3% of GDP limit set out in EU treaties, pushing the deadline back from 2027 to 2029. Again, Fitch doesn’t believe that this objective could be achieved as early as 2029.

The warning from Fitch – pending decisions from the other credit rating agencies, such as Moody’s, which is due at the end of October, and S&P Global Ratings (formerly Standard & Poor’s), in November – once again highlights the French government’s eroding credibility in the financial markets. The deficit increases have cast doubt on the Finance Ministry’s reliability. “For a long time, [the ministry] lied with credibility,” said Hadrien Camatte, a senior economist for France at Natixis, an investment bank. “Now, it’s starting to show.”

Concern about ‘permanent disappointment’

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