France will be a new care child of Europe after credit reductions

For years, Italy was the weak link in the eurozone. But now France seems to take over that questionable role. Credit rating agencies and investors are rapidly concerned about the financial stability of the country.

France under pressure after double credit reduction

This week, France got two hard blows: within a few days, two credit rating agencies lowered their opinion on the French economy. At the same time, Italy received an upgrade from Fitch, the first since 2021.

The gap between the countries is becoming smaller. According to Fitch, France is now three steps away from Italy on the credit ladder. Where France was considered more stable for years, investors see both countries getting closer together in financial risk.

At the moment, France is on A+, which indicates good creditworthiness and a low risk of default. Italy is on BBB+, a level that just falls within the safe category, but dangerously close to the so -called Rommel Status. The Netherlands and Germany retain the highest AAA rating.

Political chaos drives worries

The credit reductions are closely linked to the political situation in France. Since the early elections last year, the country has been in chaos. A divided parliament, deep ideological contradictions and now five prime ministers make structural reforms virtually impossible in less than two years.

In addition, the French state spends more than almost every other country. The government spending has risen to more than 60 percent of GDP, while the budget deficit continues to grow. Even the structural deficiency, corrected for economic fluctuations, shows that France scores worse than Italy.

Italy is slowly climbing out of the valley

Strikingly enough, Italy, for years the care child of Europe, seems to be gently getting stronger. Under Prime Minister Giorgia Meloni, the government deficit drops without the economy getting stuck completely.

“It is actually going pretty well,” says BNR house economist Han de Jong. According to him, the upgrading of Fitch is a reward for the policy of the Italian government.

The contrast with France is sharp: While Italy wins step by step, Paris seems to continue to glide towards the financial abyss.