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France was a nation we had previously fingered to lose its prized “AAA” rating. After all, if the United States was losing its universal “AAA” rating then France and a handful of other key nations we identified also had no business being “AAA.” Now France has lost its last “AAA” rating after Fitch Ratings downgraded the nation’s sovereign credit rating down to “AA+” on Friday.

France is now expected to have general government gross debt peaking higher at 96% of GDP in 2014. It is only expected to decline gradually over the long-term and should only reach 92% by 2017. Fitch previous projected France’s debt peaking at 94% and then declining more rapidly to below 90% by 2017. France’s debt ratio is significantly higher than the ‘AAA’ median of 49% and ‘AA’ median of 27%.

Fitch also went on to say that the risks to the agency’s fiscal projections are mostly to the downside. Uncertain growth, an ongoing eurozone crisis, a higher debt ratio and other factors are to blame. The economic output and forecasts are now substantially weaker than back when Fitch downgraded France’s ratings outlook to Negative from Stable:

• unemployment rate has also jumped to a 15 year high of 10.9% in May 2013;
• France is expected to remain in the EU’s Excessive Deficit Procedure for a year longer;
• economy to recover less quickly than official projections;
• subdued external demand, weaker competitiveness, high unemployment and fiscal consolidation;
• forecasts are for GDP to contract in 2013 before growing by 0.7% in 2014;
• and the current account was in a deficit of 2.3% of GDP in 2012 and has deteriorated steadily from surpluses a decade ago.

The only good news here is that ratings agency now has a Stable outlook for France. This also ends the likely credit ratings downgrade saga for what is considered to be the second strongest link of the euro, behind Germany.

FULL FITCH DOWNGRADE NOTE