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The price of French bonds dropped on Monday morning and yields rose as investors demanded a higher premium to hold government debt. Ten-year bond yields totalled 3.388%, compared to Germany’s 2.593%
Despite the enthusiasm that followed the French government’s success in pushing through a budget last week, the country received an unexpected downgrade from one of the major credit rating agencies on Friday.
S&P Global Ratings judged the debt of Europe’s second biggest economy riskier than before, due to “elevated uncertainty on public finances”.
The agency downgraded the country from “AA-” to “A+” with a stable outlook.
The decision from S&P Global Ratings was anticipated, but the timing was a surprise, as the agency had planned to release verdicts at the end of November.
S&P Global Ratings said in a statement that it expected the 2025 general government budget deficit target of 5.4% of GDP to be met. It also forecasts slower than expected progress on budgetary consolidation in the coming years.
“We expect gross general government debt to reach 121% of GDP in 2028, compared with 112% of GDP at the end of last year,” the group said.
French Minister of the Economy Roland Lescure said that the decision on the downgrade was “a call for clarity, responsibility, and seriousness,” in an interview with Franceinfo on Saturday. The minister also called on lawmakers to work together to tackle the pressing financial threat.
On 14 October, newly reappointed Prime Minister Sébastien Lecornu submitted a 2026 budget proposal to the National Assembly. The parliament has until 23 December to debate and amend the legislation.
Lescure also said: “It is really up to us, both the government and Parliament, to convince observers to continue to reassure investors and rating agencies.”
France’s credit score was downgraded by Fitch Ratings in September, with the agency citing mounting political instability and uncertainty over public finances.
The US-based agency cut France’s rating from “AA-” to “A+”, also warning that France’s debt is set to keep rising until at least 2027 without decisive action.
