France’s borrowing costs rose on Monday as markets reacted to Fitch’s Friday downgrade of the country’s credit rating, reflecting continued uncertainty over its political leadership.

Fitch lowered France’s rating from ‘AA-’ to ‘A+’ with a stable outlook, citing a “high and rising debt ratio” and noting that “political fragmentation” was obstructing fiscal consolidation.

France’s benchmark 10-year government bond yield initially climbed 7 basis points to 3.5132% on Monday morning, while the 30-year OAT yield rose 8 basis points to 4.3351%.

Both yields later eased in early trading and were largely unchanged at the time of writing, likely reflecting that credit rating downgrades had been anticipated following the collapse of former Prime Minister François Bayrou’s government after a confidence vote.

Mindful of investors’ cautious watch after more than a year of political turmoil and sharp disagreements over the 2026 budget, French President Emmanuel Macron swiftly appointed a new prime minister, France’s fifth in under two years.

Whether his ally, former Defence Minister Sebastien Lecornu, will succeed remains uncertain, as analysts expect he will encounter the same resistance to spending cuts and tax hikes needed to curb France’s budget deficit, CNBC reports.

Lecornu faced immediate challenges, with protests breaking out on his first day as prime minister and additional union-backed demonstrations expected this week, including major disruptions on Thursday.

Fitch projected France’s fiscal deficit at 5.5% of GDP in 2025, slightly lower than 5.8% in 2024, but still well above the eurozone’s projected median deficit of 2.7%.

Fitch also projected that French debt would rise to 121% of GDP by 2027, up from 113.2% in 2024, “without a clear horizon for debt stabilisation in subsequent years.”

Analysts say that although Fitch’s downgrade was mostly anticipated in French debt markets, further downgrades are expected in the future.

“French sovereign bonds have been trading at spreads to swap rates consistent with multiple downgrades,” according to ING analysts.

“It is no surprise then that French debt and the Euro have not reacted too much to Friday evening’s decision by Fitch to downgrade France one notch to A+. Locally, the focus is on how quickly, if at all, new French Prime Minister Sébastien Lecornu can focus the minds of a disparate National Assembly on the unpopular but essential path of fiscal consolidation,” they went on to say.