France is facing a defining moment of instability and economic risk as President Emmanuel Macron’s government confronts an acute budget crisis, a credit rating downgrade, and nationwide unrest.

The recent collapse of Prime Minister François Bayrou’s administration, following his failure to pass a €44 billion austerity package, has intensified concerns that France could become Europe’s new “sick man”.

The US agency Fitch downgraded France’s sovereign credit rating from AA- to A+—the lowest standing it has held—to reflect concerns about political instability, a lack of clarity on debt trajectory, and doubts over the government’s ability to bring the budget deficit under control.

The downgrade comes as public debt stands at approximately 113 to 114 percent of Gross Domestic Product (GDP), with forecasts suggesting it could rise to 121 percent by 2027 unless decisive fiscal measures are enacted.

The current budget deficit is estimated at around 5.4 to 5.8 percent of GDP—the highest in the eurozone.

In response to Bayrou’s ouster, Macron appointed Sébastien Lecornu, a close ally with a reputation for loyalty and steadiness, as prime minister.

Lecornu is now under enormous pressure to produce the 2026 budget by early October and secure its passage through a deeply divided National Assembly lacking a stable majority.

To succeed, he must negotiate with both left-wing and right-wing parties—most notably the Socialist Party, which is demanding lower deficit targets, repeal of part of the 2023 pension reform, and a new tax on the ultra-rich—as well as conservative Republicans, who oppose tax hikes and anything perceived as threatening pro-business policy.

Social unrest and mass demonstrations have added urgency to the political impasse.

On September 18, unions called nationwide strikes disrupting public services, transport, healthcare, and education, sending a message of strong resistance to austerity measures.

Proposals such as eliminating two public holidays—one of Bayrou’s more controversial cost-cutting ideas—have already been abandoned by Lecornu in a gesture toward compromise.

Analysts warn that without credible fiscal consolidation, France risks losing investor confidence, facing rising borrowing costs, and further downgrade pressures.

Yet political fragmentation, the electoral calendar (with municipal elections in early 2027 followed by the presidential polls), and polarization among parties make sweeping reform difficult.

Despite France’s economic strengths—its infrastructure, export base, educated workforce, and resilient institutions—many observers believe the current juncture represents a historic turning point.

Whether the government can translate those strengths into stability—or whether France emerges weakened—depends on Lecornu’s ability to bridge ideological divides without igniting further social and political backlash.