France Keeps A+ as Yields Match Italy

Fitch, one of three major agencies that grade governments' ability to repay debt, held France at A+ with a Stable outlook on 28 August (Fitch, Bloomberg). No downgrade. But the same report projects French deficits above 5% of GDP for the next three years. France can still borrow. The terms are getting worse.

A+ is solidly investment grade, yet it already reflects a slide: Fitch cut France from AA- just last September, citing rising debt and political instability (Fitch). A Stable outlook means the agency does not expect another move soon. It does not mean the numbers are heading in the right direction.

The deficit path and what it costs

Fitch expects France's deficit (the annual gap between what the government spends and collects) to reach 5.2% of GDP in 2026, 5.5% in 2027, and 5.2% in 2028 (France 24, Bloomberg). The government's own target for 2026 is 5.0%, and the EU's treaty ceiling is 3% (European Commission). Public debt is projected to climb to 122.7% of GDP by 2028, up from 115.7% in 2025 (Boursorama/Reuters).

The mechanism here matters more than the numbers themselves. Each year's deficit adds to the stock of debt. The interest rate France pays on that debt has risen sharply. So past borrowing becomes future spending: money that goes to bondholders instead of hospitals, pensions or tax relief. The European Commission's own June 2026 assessment pointed in the same direction, projecting deficits of 5.1% in 2026 and 5.7% in 2027 if policies stay unchanged (European Commission).

Markets are no longer pricing France below Italy

Ratings shape borrowing costs, but bond markets often move before the agencies do. France's 10-year bond yield ended 28 August around 4.09%. Germany's benchmark sat at roughly 3.27%, producing a spread (the gap between what France and Germany pay to borrow) of about 82 basis points (France-Epargne). Italian 10-year bonds traded at roughly the same level that day (Quifinanza).

That convergence is new and telling. For years, investors automatically demanded a lower return from France than from Italy on the assumption that French debt was safer. That gap has closed. The Bundesbank flagged France's widening spread in its financial stability report, and Berenberg's chief economist noted it outpaced other large economies' borrowing-cost moves (Bundesbank, Berenberg). As Sky TG24 put it, France has become the euro area's weak link; Il Foglio offered the fair correction that Italy still carries higher absolute debt and lower overall ratings (Sky TG24, Il Foglio).

Who pays when borrowing gets expensive

The French Treasury gained breathing room: no downgrade means no forced repricing before the autumn budget. Investors buying new French debt at current yields get a better return than the low-rate era offered, provided they trust France's solvency.

The losers are harder to see but more numerous. Rising interest costs eat into what is available for everything else. France remains under an EU excessive-deficit procedure (the formal process Brussels triggers when a country breaks the 3% ceiling), opened in July 2024 and still running (European Commission). Belgium shows the same squeeze in miniature: also A+, also in an excessive-deficit procedure, with its federal government trying to find roughly €10 billion in savings by mid-October (BusinessAM). Medium-sized, high-debt states cannot hide the fiscal adjustment.

Growth is weak, interest costs are rising, debt keeps climbing, and France's parliament remains fragmented. Fitch gave France time, not relief. The 2026 budget will decide whether higher debt service is paid through spending cuts, tax increases, or another delay.