A Marathon for France’s Budget
Vol. 20, No. 10 (2025) · Article 905
The debate over France’s 2025 and 2026 budget has already brought down three governments. With parliament deadlocked, some talk of an institutional crisis and even predict a collapsing political system. As in every year since 1974, the budget is not balanced: in 2024 the public deficit was 5.8% of GDP (€169.6 billion) and public debt stood at 113% of GDP (about €3.305 trillion). Both figures are up from 2023 (a 5.4% deficit and 109.8% debt). Yet another president is trying to rein in spending. Why has the public finances issue turned into such a broad, unusual crisis now?
After World War II, during the so-called trente glorieuses (“thirty glorious years” of global growth), France built a strong welfare state that reshaped the economy. The state – then the country’s biggest investor - drove modernization. Under Jean Monnet, the Planning Commission picked priority sectors and steered investment through a series of multi-year plans (six-, four-, then five-year). The economic take-off of the early 1950s made it possible to build one of Europe’s strongest social insurance systems. Although the share of public spending is lower than in the 1950s, it was still about 57% of GDP in 2024 - among the highest in Europe.
For a long time, the environment made these high outlays easier to bear. Post-war global growth – largely powered by the United States – meant redistributing a large share of revenues to strengthen the social safety net wasn’t a problem. In the stagflation of the 1970s, high inflation eroded the debt ratio. The 1990s and the Maastricht criteria brought a slow turn: France committed to fiscal discipline but, until the 2009 sovereign debt crisis, made no breakthrough reforms to revenues and spending. The long era of “cheap money” (2014–2021) also eased the pressure: at the end of 2021, 10-year French bond yields were around 0.2%, and near-zero/negative rates made high spending manageable.
Why is what “used to fit” now a problem?
Four connected factors have put France’s political class under pressure.
First, interest rates have risen, while debt and the deficit are high regardless. In 2025, the 10-year French government bond yield returned to its 2011 level – roughly a 14-year high – around 3.45%. This sharply increased interest costs for two reasons. One is rolling refinancing: France replaces maturing bonds with new ones at today’s higher rates, so the entire debt stock gets repriced over several years. The other is that fresh borrowing to cover new deficits also happens at higher rates. Old, low-coupon bonds only disappear at maturity, but because the state issues in large volumes every year, the extra cost shows up quickly. The debt itself is not necessarily larger – the interest bill is: last year the state spent €59 billion on interest. With higher rates, that line in the budget can rise by billions.
Second, rising interest costs squeeze the rest of the budget. More money spent on interest means less for education, healthcare, defence, tax cuts, and so on. If the government doesn’t offset this with spending cuts or higher revenues, the deficit widens, which requires more borrowing and even more interest – a classic “interest trap.” The Court of Audit (Cour des comptes) and other independent advisory bodies are urging a swift correction, otherwise the interest burden and debt ratio will keep climbing.
Third, the euro area’s Stability and Growth Pact and fiscal discipline matter. Because the deficit is chronically high, France is under an Excessive Deficit Procedure. In January 2025 the Council issued time-bound recommendations, and the Commission reaffirmed the need to correct the path in the spring package. Ratings agencies have indeed kept France under pressure (it was downgraded in autumn 2025), warning that failure to restore balance risks further downgrades.
Fourth, growth is weak. In 2024, the French economy grew by 1.1%. After the 6.4% rebound in 2021, growth in 2022–2024 slipped back toward about 1%. A low-growth environment is a major source of budget stress, because weaker growth and productivity cannot generate the revenues required to cover rising expenditure.
What solutions are on the table in the National Assembly?
Gabriel Attal’s outgoing government in 2024 designed a budget, coordinated with the European Commission under the euro area fiscal framework, that aimed to bring the deficit down to 3% by 2028. Today, the government’s Council of Economic Analysis (CAE) says France needs a multi-year adjustment of roughly €112 billion, across about 170 concrete measures. After the snap elections in summer 2024, parties refused to back the budget. In a three-way parliament, each force views spending cuts through its own political lens. Political stability – and any way out of the stalemate – depends on striking a budget compromise. Economic stability depends on what kind of compromise it is. Time is also short: to keep the state running, the budget law needs to be in place by December 31, 2025.
The governing Renaissance party wants as few changes as possible: sharply rein in the planned growth in spending but avoid raising taxes.
Les Républicains (who backed the government up to the second Lecornu cabinet) say “0% tax hikes, 100% savings.” That stance makes them a natural ally on spending restraint.
The Socialists want a fairer sharing of the tax burden, with the better-off contributing more. Their flagship idea is the Zucman tax, expected to raise several billion euros that could fund public services and make spending cuts elsewhere easier to accept.
La France insoumise (LFI) pushes for redistributive tax packages (on wealth and dividends) and tougher taxation of big tech (GAFAM). Since bringing down the Barnier government, LFI has at times voted with the Rassemblement national (RN) on items like “windfall” taxes. The centrist parties call this an “unholy alliance,” arguing it blocks any measure that would cut spending. The RN itself is divided and has also backed some amendments that would raise corporate tax burdens. The two “extreme” parties have very different programs but a shared short-term aim: weaken the Lecornu government and prevent it from using Article 49.3 – or bring it down if it does.
(Article 49.3 lets the government commit its responsibility on a bill – like the budget – before the National Assembly: if no confidence motion is passed within 24 hours, the bill is deemed adopted without a vote.)
What compromise is emerging after the first week?
The parties face long and difficult talks, and the first week yielded very little. As a gesture toward the Socialists, the government passed several ad hoc corporate tax measures (e.g., on the exit tax and the pacte Dutreil), but the left’s flagship Zucman tax has not been included in the text. A few targeted social tweaks were adopted (e.g., topping up municipal resources, targeted tax relief, and measures affecting agriculture), often through one-off, cross-party votes. Talks between the Socialists and the centrist bloc continue, but there is no broad “pact” yet.
Under Article 47 of the Constitution, parliament has 70 days to adopt the budget laws: 40 days for the National Assembly’s first reading, 20 days for the Senate, and 10 days for final conciliation between the two chambers. If there is no agreement within 70 days, the government can bring its original budget text into force by ordinance (ordonnance). This route has not been used since 1958.
If France still lacks an approved budget on January 1, 2026, there is another emergency option. Parliament can pass a loi spéciale (“special law”) authorizing the state to collect taxes and to finance only basic, previously voted services (services votés) needed to keep the administration running – no new measures can be launched. At the turn of 2024/2025, this transitional regime lasted for roughly six weeks.
Where things stand now: the debate in the National Assembly is suspended until November 12. Around 2,300 amendments remain, and the chamber has until November 23 to complete the first reading. This raises the likelihood of using Article 49.3 (or Article 47), even though the government has promised not to resort to these tools.