New nightmare for Macron as French economy spirals into chaos

French borrowing costs have risen faster than all other major European economies on Monday, The Telegraph has reported. This comes following the country's credit rating downgrade by Fitch. The world's major credit rating agency said on Friday it had downgraded France from its AA- status to A+ as a result of its "high and rising debt ratio". In early trading, France's 10-year bond yield - a benchmark for the cost of servicing the country's €3.35 trillion (£2.9 trillion) debt pile - rose to 3.51%, higher than Greece, Italy, Portugal and Spain.

The downgrade has concerned investors that the French government cannot control the country's spiralling budget deficit. This, alongside France's increased polarisation and fragmentation of politics, is a major worry following the collapse of the French government last week.

The French president Emmanuel Macron lost his sixth prime minister when François Bayrou was dumped from office in a no-confidence vote over his proposed budget cuts.

Fitch said its outlook for France remains stable but forecast that the country's debt will rise to 121% of GDP by 2027, up from 113.2% in 2024, due to what it described as "persistent primary fiscal deficits."

Bayrou sparked outrage among opposition parties and voters with plans for a €44 billion austerity budget, which includes scrapping two public holidays and imposing higher taxes on pensioners.

Fitch warned that the ousting of Bayrou made it "unlikely that the headline fiscal deficit will be brought down to 3pc of GDP by 2029, as targeted by the outgoing government".

Fitch said: "France's rising public indebtedness constrains the capacity to respond to new shocks without further deterioration of public finances."

It added: "We expect the run-up to the presidential election in 2027 will further limit the scope for fiscal consolidation in the near term and see a high likelihood that the political deadlock continues beyond the election."

French bonds recovered some ground on Monday but were still underperforming compared to peers across Europe.