France: Fitch downgrades credit rating. Is a sell-off of French government bonds now imminent?

Lecornu now faces the task of presenting a budget that will reduce the deficit from an estimated 5.4 percent of gross domestic product. However, his plan is likely to be less ambitious than Bayrou's target of 4.6 percent. To secure a majority in the deeply divided parliament, concessions to the Socialists are expected. These could include higher taxes on the wealthy and a weakening of the pension reform pushed through by Macron in 2023.

However, Lecornu risks alienating members of parliament from Macron's own party and the conservative Republicans. The downgrade is unlikely to have much impact on major French banks such as BNP Paribas and Crédit Agricole, as they already have an A+ rating from Fitch.