Fitch Downgrades France's Outlook Amid Fiscal Woes

Fitch has revised France's credit outlook to 'negative,' citing fiscal policy challenges and political risks. The agency expects substantial fiscal deficits, projecting government debt to hit 118.5% of GDP by 2028. France's new budget aims to close the fiscal gap with spending cuts and tax hikes.

Credit ratings agency Fitch has downgraded France's outlook to 'negative' from 'stable,' attributing the shift to a rise in fiscal policy challenges and political risks.

The agency notes that this year's fiscal trajectory implies a worsening financial position for France, forecasting broader fiscal deficits that could elevate government debt to 118.5% of GDP by 2028. Despite a stable 'AA-' rating, France's financial health has deteriorated due to underwhelming tax revenue and excessive spending, risking a potential downgrade.

To address these concerns, the French government has unveiled a 2025 budget plan designed to alleviate the public finance shortfall by 60 billion euros through strategic spending cuts and tax increases targeting the affluent and large corporations. Finance Minister Antoine Armand emphasized the administration's commitment to improving public finance stability and controlling debt. Fitch, however, warns that political fragmentation and a minority government may hinder France's efforts to stabilize its finances.

(With inputs from agencies.)