Fitch Signals Rising Risks For France's Public Finances

Fitch maintained France’s sovereign rating at A+, but lowered its outlook from “stable” to “negative”. Behind the expected debt around 124% of GDP in 2028, the most concrete danger comes from the gradual refinancing of old loans at rates close to 5%.

Fitch prepares the ground for a new downgrade

The decision on October 30 does not constitute an immediate downgrade of the French rating. However, it signals that Fitch could downgrade it if the government fails to stabilize the debt, sustainably reduce the deficit, or restore investor confidence.

The agency cites lower growth, high borrowing costs, and a larger deficit than in its August review. It also highlights that political fragmentation and the social context complicate the adoption and implementation of a multi-year budget program.

The main indicators show why the outlook deteriorated :

• Public debt reached 3,595.5 billion euros at the end of June 2026 ;
• It then represented 119% of GDP, compared to 115.7% at the end of 2025 ;
• Fitch forecasts a ratio close to 124% in 2028 ;
• The public deficit is expected to reach 5.4% of GDP in 2026 ;
• The French ten-year rate recently exceeded 5.14%, a high since 2002 ;
• Annual interest charges would rise from 79.2 billion euros in 2026 to 91.2 billion in 2027.

The government presents a slightly less degraded path. Its report on debt foresees a ratio of 119.3% of GDP in 2026, then 121.7% in 2027, with a start of decline from 2029. This improvement depends, however, on the adoption and execution of the measures contained in the budgetary texts.

Fitch remains more cautious. The agency estimates that the debates preceding the 2027 presidential election have not increased the likelihood of a sustainable deficit reduction. Nevertheless, it maintains the A+ rating thanks to the size of the economy, the strength of institutions, membership in the euro zone, and the resilience of the banking sector.

Each refinancing turns rates into a durable expense

France does not refinance its 3,595 billion euros of debt all at once. The average life of the state’s negotiable debt is about eight years and five months. This high maturity temporarily protects the budget against immediate transmission of market rates.

But this protection erodes with each maturity. When an old bond issued at a very low rate matures, the state must borrow again to repay its principal. The new bond is then issued under current, much more expensive conditions.

The weighted average rate of OATs issued in 2026 already reached 3.55% at the end of September, while the ten-year benchmark rate approached 5% on October 30. The budgetary effect therefore spreads slowly but persists for the entire duration of the new bonds.

The interest charge forecast for 2027 would increase by 12 billion euros in one year, a rise of more than 15%. At the scale of all public administrations, it would rise from 2.2% of GDP in 2025 to 3.7% in 2030.

This mechanism matters more than a one-off crossing of 120% or 124% of GDP. Every euro devoted to interest reduces resources available for education, health, defense, or investment, unless taxes are increased or the deficit is further widened.

Low growth worsens the problem. French GDP shrank by 0.1% in the third quarter according to on-chain data, after stagnation in the second and decline in the first quarter. An almost immobile economy mechanically increases the debt weight relative to GDP and limits tax revenues.

The budget must convince beyond its simple adoption

The government wants to bring back the public deficit to 5% of GDP in 2027, compared to 5.4% expected in 2026. The plan relies on a total effort of 54 billion euros and an estimated growth of 1% next year.

Its adoption remains uncertain because of a lack of majority in the National Assembly. The Minister of Economy, Roland Lescure, does not rule out article 49.3 nor, as a last resort, ordinances. Fitch believes constitutional mechanisms will likely allow passing the text.

However, such adoption will not be enough to restore confidence. Investors must believe that the measures will survive social tensions, parliamentary compromises, and the presidential election. A budget imposed but quickly challenged would not sustainably stabilize rates.

The negative outlook therefore acts like a countdown. Fitch plans to review the French rating no later than the end of February 2027. Until then, the market will judge less the displayed promises than the country’s ability to actually reduce its deficit. The real risk is not a sudden debt crisis but a slow and cumulative rise in interest that gradually deprives the French budget of any maneuvering room.