France receives lowest credit rating due to crisis

In Short:
– Fitch Ratings downgraded France’s credit rating to A+, citing political instability and fiscal challenges.
– New Prime Minister Lecornu must secure budget approval amidst rising deficit and potential no-confidence vote.

Fitch Ratings has downgraded France’s credit rating from AA- to A+, the lowest ever recorded, amid ongoing political and fiscal challenges.

The decision comes shortly after Prime Minister François Bayrou was removed in a vote of no confidence regarding his €44 billion austerity plan.

President Emmanuel Macron has appointed Sébastien Lecornu as the new prime minister, marking the fifth leadership change in under two years.

Fitch highlighted political instability as a key factor undermining fiscal reforms, with France’s debt now at €3.3 trillion, or 113.9% of GDP.

The budget deficit increased to 5.8% of GDP and is expected to rise, posing challenges ahead.

Political Instability

The new prime minister faces a divided parliament and must secure budget approval by October 7.

The far-left plans a no-confidence vote against Lecornu, complicating further cooperation on legislative reforms, with S&P Global hinting at a potential downgrade.