Why an extra €310 billion?
According to the budget plan presented by the Finance Ministry to the government in October, France needs to raise just over €305 billion in 2026 — slightly more than in 2025 — to keep the state running and repay some of its existing debt. According to the financing plan presented earlier this week, this will be done by selling around €310 billion in government bonds — in other words, by borrowing from financial markets with a medium- and long-term horizon. The additional borrowing is mainly due to more old loans maturing and the public debt having to be refinanced at a higher cost. Repayments of previous borrowing will rise from 168 billion euros in 2025 to almost 176 billion euros in 2026, while the annual gap between government spending and revenue — the budget deficit — is expected to reach around 124 billion euros. In addition, debt servicing costs are rising as higher interest rates are gradually passed on, partly as a result of France’s credit rating downgrade.Lower credit ratings
Paris is starting to feel the impact of downgrades and negative outlooks from the major rating agencies, which act as indicators for investors when they assess a country’s debt. In recent years, Moody’s, S&P and Fitch have warned that high and rising debt, political tensions over reforms and repeated fiscal slippages make France a riskier investment than in the past, even as it remains firmly within investment grade. Foreign investors hold more than half of France’s tradable government debt, making the country more vulnerable to a shock to confidence and higher interest rates from markets. The amount the state pays in interest alone is expected to rise from €52 billion in 2025 to more than €59 billion in 2026 — money that cannot be used for schools, hospitals or investment and that still does not reduce overall debt.In the EU’s “black books”
Meanwhile, at an impressive €3.2 trillion, France’s public debt has risen from around 97.4% of GDP in 2019 to over 112% in 2023, placing the country among the most heavily indebted in the eurozone and well above the 60% limit set by the EU’s Stability and Growth Pact. Germany’s debt, by contrast, stands at around 62% of GDP, almost half that of France, while the eurozone average is below 90%. Deficits have also widened. France went from a central government deficit of 2.1% of GDP in 2019 to around 4.9% in 2023 and remains in a primary deficit, meaning it continues to borrow even before interest payments — unlike Germany, which has moved much closer to balance. France is now the third most indebted EU member state, after Greece and Italy, and is facing renewed pressure from the EU as fiscal rules are gradually reinstated.
In the EU’s “black books”
Meanwhile, at an impressive €3.2 trillion, France’s public debt has risen from around 97.4% of GDP in 2019 to over 112% in 2023, placing the country among the most heavily indebted in the eurozone and well above the 60% limit set by the EU’s Stability and Growth Pact. Germany’s debt, by contrast, stands at around 62% of GDP, almost half that of France, while the eurozone average is below 90%. Deficits have also widened. France went from a central government deficit of 2.1% of GDP in 2019 to around 4.9% in 2023 and remains in a primary deficit, meaning it continues to borrow even before interest payments — unlike Germany, which has moved much closer to balance. France is now the third most indebted EU member state, after Greece and Italy, and is facing renewed pressure from the EU as fiscal rules are gradually reinstated.Looking ahead to the 2027 presidential election
France’s fiscal impasse follows an extremely turbulent political period, during which Macron has changed five prime ministers in his second term. It reflects the difficulties of governing with a parliament caught between competing blocs, without a clear majority. Current Prime Minister Sébastien Lecornu remains under intense pressure from the president to secure the 2026 budget, while at the same time facing threats of no-confidence motions from both the left and the right. Political opponents are expected to exploit the fiscal crisis and Macron’s “lame duck” position ahead of the 2027 presidential election, presenting the debt and budget situation as a failure of his centrist movement. The National Rally is likely to blame what it sees as excessive spending and ties to Brussels, while pledging to curb immigration and benefits but protect pensions. Meanwhile, the left-wing New Popular Front is expected to attack austerity measures and push for new taxes on wealth to finance social spending. Macron’s center-right allies, such as Édouard Philippe, are likely to demand fiscal discipline through pension cuts and spending caps, as all sides capitalize on the rotation of prime ministers and institutional distrust to boost their poll ratings. The lower house of parliament will resume consideration of a full budget bill in the coming weeks, with debates expected to resume on January 13. Both houses must agree on the text before it becomes final. France appears unable to politically manage the fiscal misstep and risks being the first act of a full-blown Eurozone debt crisis.Please follow and like us:
