France risks a credit rating downgrade on Friday, raising pressure on new Prime Minister Sebastien Lecornu as he drafts next year’s budget.
Fitch Ratings, a leading US agency, is expected to issue its latest review of France’s debt capacity after Wall Street closes later in the day.
The review comes days after Lecornu’s predecessor, Francois Bayrou, lost a parliamentary confidence vote over an austerity budget aimed at cutting deficits.
France currently holds an “AA-” rating, signalling strong repayment ability. A downgrade to “A” would indicate vulnerability to economic and political pressures.
Rising yields on French 10-year bonds, which reached 3.47 percent on Tuesday, reflect market concerns, drawing comparisons with Italy’s weak performance.
Economist Charlotte de Montpellier of ING said investors are watching France’s finances closely, while Eric Dor of IESEG called a downgrade “logical” given political gridlock.
France’s debt stood at 113 percent of GDP in 2024, with a deficit of 5.8 percent, both above eurozone fiscal limits of 60 and 3 percent respectively.
Analysts say Fitch may delay action to allow Lecornu to present his government’s fiscal strategy, but pressure from rivals like S&P Global looms in November.
INSEE data released Thursday projected 0.8 percent GDP growth this year, slightly above previous forecasts, offering some relief to policymakers.
