France Keeps A+ as Yields Bite

France got through Fitch's latest verdict without the humiliation of another downgrade. On 28 August, the ratings agency kept the country at A+ with a Stable outlook (Fitch, Bloomberg). For Paris, that buys time. It does not buy comfort.

Fitch is one of the three big agencies whose judgements help shape how much governments pay to borrow. A+ remains safely investment grade, but France is already lower than it was a year ago. Fitch cut it from AA- last September, pointing to rising debt and political instability (Fitch). A Stable outlook simply means Fitch does not expect to move the rating again soon. It says little about whether the public finances are improving. On Fitch's own forecasts, they are not.

The deficit path and what it costs

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

The point is not only that the numbers are large. It is how they compound. Each deficit adds to the existing stock of debt. The rate France pays on that debt has moved up sharply, so old decisions become new budget pressure. More money goes to bondholders, less is available for hospitals, pensions, tax cuts or investment. The European Commission's June 2026 assessment told the same story, projecting deficits of 5.1% in 2026 and 5.7% in 2027 if policy does not change (European Commission).

Markets are no longer pricing France below Italy

Ratings matter, but the bond market often reaches its conclusion first. France's 10-year yield ended 28 August at about 4.09%. Germany's benchmark was roughly 3.27%, leaving a spread, the extra return investors demand to hold French rather than German debt, of about 82 basis points (France-Epargne). Italian 10-year bonds were trading at roughly the same level that day (Quifinanza).

That is the shift worth watching. For years, France borrowed more cheaply than Italy because investors treated French debt as the safer eurozone asset. That assumption has weakened. The Bundesbank has already flagged France's widening spread in its financial stability report, while Berenberg's chief economist noted that France's borrowing costs had moved faster than those of other large economies (Bundesbank, Berenberg). Sky TG24 described France as the euro area's weak link; Il Foglio added the necessary caution that Italy still has higher absolute debt and weaker overall ratings (Sky TG24, Il Foglio).

Who pays when borrowing gets expensive

The immediate winner is the French Treasury. No downgrade means no forced repricing before the autumn budget, and no fresh signal to investors that the next step down is imminent. Buyers of new French debt also get a return that would have seemed generous in the low-rate years, so long as they believe France can keep financing itself without losing political control of the adjustment.

The costs fall more widely. Higher interest bills narrow the room for everything else. France remains under the EU's excessive-deficit procedure, the formal process used when a member state breaches the 3% deficit ceiling, opened in July 2024 and still running (European Commission). Belgium shows the same squeeze on a smaller scale: also rated A+, also in an excessive-deficit procedure, and with its federal government trying to find roughly €10 billion in savings by mid-October (BusinessAM). For medium-sized and large high-debt states alike, the old trick of waiting for growth to do the work is becoming harder to sell.

For Ireland, the lesson is familiar from a more bruising chapter: market patience is useful until it is not. France is nowhere near a bailout story, and its economy has a depth Ireland never had in 2010. But the mechanism is the same. Weak growth, higher interest costs, rising debt and a fractured parliament leave less room for manoeuvre each year. Fitch has given France time. The 2026 budget will show whether Paris uses it for spending cuts, tax increases or another round of delay.