Fitch hits France with record-low credit score
France’s credit score has been downgraded from AA- to A+, the country’s lowest on record, with Fitch Ratings citing political instability and uncertainty over how the government will rein in mounting debt and budget deficit.
The EU’s second-largest economy has one of the bloc’s highest debt levels after Greece and Italy, at about 113% of GDP. Its deficit is projected at 5.4-5.8% this year, well above the EU’s 3% limit. The downgrade followed last week’s ouster of Prime Minister Francois Bayrou after a failed confidence vote on his €44 billion austerity plan, which sought to cut the deficit and debt by slashing public-sector jobs, curbing welfare, and scrapping two public holidays.
“The government’s defeat in a confidence vote illustrates the increased fragmentation and polarization of domestic politics,” Fitch said on Friday. “This instability weakens the political system’s capacity to deliver substantial fiscal consolidation.”
The agency said it was unlikely that France’s deficit would drop in the next several years and warned debt would rise further to 121% in 2027, citing the lack of “a clear horizon for debt stabilization” given political instability. Fitch added that high taxes and large social spending leave little room to stabilize finances, and cautioned that the 2027 presidential race will likely limit the potential for fiscal reforms.
Outgoing Finance Minister Eric Lombard said he has “taken note” of the downgrade but insisted the economy was strong. He blamed fiscal strains on interest rates that are “too high” and noted that new Prime Minister Sebastien Lecornu, the fifth in less than two years, is already consulting parliament on a budget to restore public finances.
A downgrade usually raises borrowing costs by lifting bond yields. France’s ten-year yield climbed to 3.5% on Friday, near Italy’s, one of the bloc’s weakest performers. Higher yields could increase debt-servicing costs, analysts warned, which Bayrou previously said were already at an “unbearable” level.
Some experts also warned that the downgrade could prompt similar cuts by other agencies, triggering forced selling by institutional investors barred from holding debt below AA.
Finnish PM admits economic pain from Russia sanctions
Finland’s economic growth has suffered due to sanctions on Russia linked to the Ukraine conflict, Prime Minister Petteri Orpo has admitted. He noted that Finland has lost nearly all trade with Russia and billions in investments since it closed the border with its neighbor.
Finland, which shares a 1,300km (800-mile) border with Russia, has imposed several rounds of sanctions on Moscow in line with EU policy since 2022. It has also tightened entry rules for Russian citizens and shut all but one border checkpoint with its neighbor. The moves saw trade between the two countries drop to $1.5 billion in 2024, compared with $11 billion in pre-conflict 2021.
In an interview with Yle Areena on Saturday, Orpo acknowledged that sanctions have hit Finland harder than most EU members due to its traditionally close trade ties with Russia.
“The fact that the border is closed means, for example, 10 million cubic meters of Russian timber for our industry is not coming in. Finnish companies have lost billions in investments in Russia. Nearly all border traffic and trade have stopped,” Orpo said. “That brings uncertainty. All this has led to the fact that the growth of the Finnish economy has not been as desired.”
And all because you believed the lie that Russia was an imminent threat to you and the rest of Europe. Silly people! Now it is you who are a threat to Russia.
Despite this, Orpo echoed other NATO members in claiming Russia remains a “permanent threat” to Finland and the EU, vowing to increase defense spending and militarization to counter it. Finland joined NATO in 2023, a step Moscow – which views the bloc’s expansion as a trigger of the Ukraine conflict – called a “historic mistake.”
Russia has repeatedly rejected claims it poses a threat, accusing the West of fueling Russophobia to justify military buildups and divert attention from domestic problems. It has condemned Western sanctions as illegal and warned they would backfire.
The Finnish economy slipped into recession in both 2023 and 2024. According to Eurostat, its growth projections for 2025 are the lowest in the EU.
