The downgrade occurs as France faces a political crisis and struggles to reduce its significant public debt.
On Tuesday, French President Emmanuel Macron appointed Sébastien Lecornu as prime minister after former prime minister François Bayrou was ousted in a confidence vote due to his proposed €43.8 billion budget cut for the upcoming year.
“The lead-up to the 2027 presidential election is expected to further restrict the potential for fiscal consolidation in the short term, with a strong chance that the political impasse will persist beyond the election,” stated the agency.
If Fitch’s downgrade is echoed by other major rating agencies, France could face challenges. Moody’s and Standard & Poor’s are set to review the country’s credit rating in October and November, respectively.
The government has promised to reduce the country’s deficit to 4.6 percent of GDP next year and to bring it below the 3 percent threshold mandated by EU rules by 2029.
Financial institutions and auditors have consistently advised France to control its deficit, which surged following the coronavirus pandemic and energy crisis. The country’s auditors and the former prime minister have cautioned that without substantial cuts, debt repayment will become France’s largest budget item next year, surpassing education spending.
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