Fitch downgraded France's credit rating from "AA-" to "A+". This came after President Emmanuel Macron faced political instability and deep divisions over how to tackle the country's strained public finances, AFP reported.  

Fitch also warned that the country's "mountain of debt" would continue to grow until at least 2027 if urgent measures were not taken.

The downgrade comes just four days after the resignation of Prime Minister François Bayrou, who lost a vote of confidence in parliament over his attempt to push through austerity budget. He insisted on serious spending cuts to curb France's deficit and debt.

New Prime Minister Sébastien Lecornu will face an even more difficult task in drawing up next year's budget.

"The government's defeat in the confidence vote illustrates the growing fragmentation and polarisation of domestic politics," Fitch said.

"This instability weakens the political system's ability to implement meaningful fiscal consolidation," the agency added. It predicts that the budget deficit will not be reduced to 3% of GDP by 2029, as planned by the previous government. 

Outgoing Economy Minister Eric Lombard acknowledged the agency's decision but insisted that "the French economy remains solid."

Such credit rating downgrades usually increase the risk premium that investors demand to buy government bonds. However, some financial experts believe that the debt market has already "calculated" the expected downgrade for France.

On September 9, the yield on 10-year French government bonds rose to 3.47%, which is close to the level of Italy—one of the worst-performing economies in the eurozone. | BGNES