Fitch downgrades crisis-strained France

Credit rating agency Fitch downgraded France's sovereign credit score on Friday to the country's lowest level on record, stripping the euro zone's second-largest economy of its AA- status as it grapples with political crisis and ballooning debt, Report informs via Reuters.  

The move, bringing Fitch's score to A+, heaps pressure on Prime Minister Sebastien Lecornu just days into the job as he scrambles to form a cabinet and draft a 2026 budget that can pass a deeply divided parliament.  

The rating, the lowest on record for a major credit rating agency, has a stable outlook for future moves, Fitch said, attributing its cut to the lack of "a clear horizon for debt stabilisation in subsequent years."  

The downgrade was already priced into markets, analysts said. But the timing of the move is awkward for France, and underlines growing investor concerns over its ability to rein in its budget deficit - now the highest in the euro zone.  

President Emmanuel Macron this week tapped Lecornu, a conservative loyalist, to form a government after lawmakers ousted veteran centrist François Bayrou in a confidence vote over his plans for a 44 billion euro ($52 billion) budget squeeze.  

Lecornu became Macron's fifth prime minister in less than two years, and faces a near-impossible task to pass a slimmed-down budget through parliament - ordeals that led to the defenestration of France's last two prime ministers.  

"This instability weakens the political system's capacity to deliver substantial fiscal consolidation," Fitch said in a statement.  

Finance Minister Eric Lombard said he had taken note of Fitch's move and that Lecornu was pushing ahead with consultations with lawmakers to get a budget adopted and restore the public finances.  

Fitch's downgrade to an A+ score is more consequential than recent downgrades as it could presage peers to follow suit, potentially leading to forced selling of French bonds by investors bound by ratings thresholds.  

French debt has come under pressure since Bayrou called the confidence vote last month, driving borrowing costs close to those of Italy, which carries the euro zone's second-highest debt burden and a much lower credit rating.