Fitch Turns Negative on France as Debt Nears 124% of GDP by 2028

Fitch Ratings shifted its outlook on France to negative from stable on Oct. 30, warning that weaker growth, higher borrowing costs and persistent budget deficits are making French finances harder to stabilize. The agency kept France at A+, but the revision opens the door to another downgrade. Fitch now expects government debt to rise from 115.7% of GDP in 2025 to about 124% by 2028, according to Reuters. Interest payments are projected to climb from 2.5% of GDP in 2025 to 3.3% in 2028. The budget deficit is seen holding near 5.5% of GDP in 2027, well above the European Union's 3% threshold. Those forecasts land as France faces some of its highest borrowing costs in more than two decades. The 10-year bond yield recently topped 5.14%, a level last recorded in 2002. Higher rates create a difficult cycle: as existing bonds mature, France must refinance part of its debt at market rates, potentially lifting interest costs and leaving less room for public services and investment. Bond markets have been pricing in fiscal risk for weeks. On Oct. 22, the French 10-year yield stood at about 5.14%, and the spread over German bunds widened to nearly 178 basis points, the highest since the 2011 eurozone debt crisis. Germany's bonds serve as a benchmark for relatively low-risk eurozone borrowing, so the wider spread shows investors are demanding more compensation for French fiscal uncertainty. The Swiss franc strengthened against the euro as investors sought safer assets. Rising sovereign yields also reduce the price of existing bonds, putting valuation pressure on European bank portfolios, a dynamic already visible in October's European banking selloff. France's fiscal strain has intensified amid political divisions and difficulty securing support for spending cuts and tax measures. The economy contracted 0.1% in the third quarter, while the government is negotiating a 2027 budget aimed at reducing the deficit. Economy Minister Roland Lescure has reaffirmed the commitment to bring the deficit down to 5%. Fitch's move follows Moody's decision to keep France at Aa3 with a negative outlook, a sign that debt-sustainability concerns extend beyond one agency. The pressure also complicates the European Central Bank's task, with persistent inflation and higher sovereign borrowing costs further complicating interest-rate policy across developed markets.