France Keeps Rating, Pays Italy Rates

Fitch, one of the three main agencies that judge whether governments are likely to repay their debts, left France at A+ with a Stable outlook on 28 August (Fitch, Bloomberg). There was no downgrade. But the same assessment expects French deficits to stay above 5% of GDP for the next three years. France can still borrow, but it is paying more to do so.

A+ remains a strong investment-grade rating. It also carries the memory of last September's downgrade, when Fitch cut France from AA- because of rising debt and political instability (Fitch). Stable means Fitch is not signalling another imminent move. It does not mean France's public finances are improving.

The deficit path and what it costs

Fitch expects France's deficit, meaning the annual gap between what the state spends and what it collects, to reach 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 expected to rise to 122.7% of GDP by 2028, from 115.7% in 2025 (Boursorama/Reuters).

The mechanism is simple, and familiar to any eurozone country that has had to explain its books to Brussels. Every deficit adds to the debt pile. When interest rates rise, yesterday's borrowing becomes tomorrow's fixed cost. More money goes to bondholders, leaving less room for hospitals, pensions, tax cuts or investment. The European Commission's June 2026 assessment pointed the same way, 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 because they affect how investors price government debt. But markets often move before the agencies do. France's 10-year bond yield ended 28 August at around 4.09%. Germany's benchmark was roughly 3.27%, leaving a spread, or gap in borrowing cost, of about 82 basis points (France-Epargne). Italian 10-year bonds traded at roughly the same level that day (Quifinanza).

That shift matters because France used to borrow more cheaply than Italy almost by default. Investors treated French debt as safer, and demanded a lower return. That gap has now closed. The Bundesbank has 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 called France the euro area's weak link; Il Foglio added the necessary caution that Italy still has higher absolute debt and weaker ratings overall (Sky TG24, Il Foglio).

Who pays when borrowing gets expensive

The French Treasury has gained time. With no downgrade, there is no immediate forced repricing before the autumn budget. Investors buying fresh French debt at current yields get a better return than they did in the low-rate years, provided they still trust France's capacity to pay.

The cost falls elsewhere. Higher interest payments quietly narrow the choices available to government. France remains under the EU's excessive-deficit procedure, the formal process Brussels opens when a member state breaches the 3% deficit ceiling. That procedure began in July 2024 and is still running (European Commission). Belgium shows the same pressure on a smaller scale: it is also rated A+, also under an excessive-deficit procedure, and its federal government is trying to find about €10 billion in savings by mid-October (BusinessAM). For high-debt eurozone states, the adjustment cannot be postponed indefinitely.

For Malta, the lesson is not that France has suddenly become Italy. It is that size and political weight no longer insulate a member state from market discipline. Weak growth, rising interest costs, climbing debt and a fragmented parliament have left Paris with less room than it once had. Fitch has given France time, not comfort. The 2026 budget will show whether the bill is paid through spending cuts, tax increases, or another delay.