France Downgraded to A+ by Scope Ratings

Prime Minister Sébastien Lecornu presented the outlines of the 2027 budget just a day before the rating action, including an effort of about 54 billion euros to steer the deficit to 5% from 5.4% this year. That still leaves France well above the European Union’s preferred fiscal trajectory and highlights the political difficulty of pushing through spending restraint, especially with retirees and public-sector workers facing contributions.

Scope said the “persistent deterioration of budgetary prospects” reflects rising public debt, deficits that remain elevated and limited progress on structural reform. It also pointed to “a difficult political context,” with fragmentation and polarization deepening since the 2024 dissolution of parliament, a dynamic it expects to last beyond the 2027 presidential election.

For investors, the downgrade adds to the case for caution on French sovereign risk and could keep upward pressure on yields versus other euro-area borrowers. France’s 10-year borrowing cost rose to 4.50% in mid-September, the highest since 2008, and higher financing costs can feed back into the deficit by lifting debt-service expenses.

The move also lands in a market already sensitive to sovereign-credit headlines across Europe. French assets had been trading with growing concern around fiscal credibility, and the rating cut may reinforce demand for higher compensation in both government bonds and France-linked assets.

A separate pressure point is the broader macro backdrop, with France facing the prospect of slower growth and weaker policy flexibility if borrowing costs stay elevated. That leaves the government with less room to absorb shocks and more dependence on a credible multi-year consolidation plan.

Scope’s action now puts more focus on the remaining major rating reviews and on whether Paris can convince markets that the 2027 budget is the start of a durable adjustment rather than another temporary fix.