French government bonds slipped further behind their Iberian cousins on Monday, after Fitch Ratings saw fit to remind markets that political chaos in Paris has consequences. President Emmanuel Macron’s latest downgrade was less a shock and more a confirmation: fiscal drift, a splintered parliament, and serial prime ministers do not a triple-A nation make.

While Greece, yes, Greece, now enjoys a higher credit rating than France, investors were left digesting the spectacle of OATs underperforming the supposedly “fragile” South. Spanish and Portuguese debt outshone, buoyed by fresh upgrades from S&P and Fitch. France, by contrast, clings to a sliding scale of credibility, forced to pay more to borrow than countries once regarded as market pariahs.

Despite its loftier credit standing, France finds itself priced like a second-tier borrower. Investors have grown weary of Macron’s inability to ram through budget reforms, and many doubt whether Sébastien Lecornu, the fifth prime minister in two years, can do more than rearrange deckchairs on the fiscal Titanic.
French bonds already trade significantly cheaper than their AA or single-A peers as the market braces for yet more bad news from other agencies. It would hardly be the first time. Since Macron’s ill-timed snap elections produced a deadlock, France’s premium over Germany has widened sharply, reaching levels unseen since January. Even Greece is now outperforming. Yes, the irony writes itself.

The downgrade is just the latest in a string of blows. Fitch downgraded France due to ballooning debt and growing political polarisation, while simultaneously upgrading Portugal. Spain, meanwhile, has been nudged higher by S&P. The optics are brutal: Lisbon and Madrid climbing the ladder, Paris sliding down it.
France’s 10-year yield now sits around 3.49%, but still trades wide of Portugal (3.10%) and Spain (3.26%). The spread over Germany has ballooned to around 80 basis points, underscoring how quickly France has gone from core safe haven to problem child. Investors are already whispering about what happens if S&P and Moody’s follow Fitch’s lead. A downgrade below AA from all three majors suddenly looks plausible.

The political backdrop hardly reassures. Macron’s centrists are caught between a leftist bloc ranging from fire-breathing populists to weary socialists, and a surging far-right under Marine Le Pen. Parliament has already torpedoed Macron’s last attempt at spending cuts, toppling François Bayrou’s government and leaving Lecornu with the unenviable job of trying again. Few are optimistic.
Investors remain negative on France because they don’t see how the new Lecornu government can credibly implement fiscal reforms.
The uncomfortable truth is that France, once the anchor of the eurozone, is now trading at a discount to nations it used to lecture about fiscal responsibility. Investors may forgive one downgrade, but if the majors line up against Paris, the comparison with Italy, and worse, Greece, will no longer be theoretical.
Macron promised reform. Fitch has delivered reality. The rest of the agencies may soon do the same.