ING: France's 2027 Budget, First Test of Fiscal Consolidation

[ING: France's 2027 Budget, First Test of Fiscal Consolidation]

⑴ France's 2027 budget could prevent a sharp deterioration in public finances but is insufficient to stabilize public debt; its passage would bring some relief, yet fiscal and political risks are expected to far outlast next year's presidential election.

⑵ France's public finances have deteriorated significantly, the budget faces a difficult parliamentary process, and the presidential election offers no clear prospect of political stability.

⑶ Economic conditions provide limited support, with GDP growth projected at just 0.3% in 2026 and 0.6% in 2027.

⑷ France's debt dynamics are particularly unfavorable, with the public debt ratio rising sharply over the past 15 years, while many other European countries have reduced their debt burdens.

⑸ In mid-2026, France's public debt reached 119% of GDP, and is expected to rise to 121.7% in 2027.

⑹ Persistent primary deficits, rising interest expenditures, and weak growth mean that without sustained fiscal adjustment, debt will continue to rise.

⑺ The draft budget targets reducing the public deficit to 5% of GDP in 2027, down from 5.4% in 2026 and 5.1% in 2025, requiring approximately €43 billion in new measures.

⑻ Without these measures, the government estimates the deficit would reach around 6.5% next year, but a 5% deficit is still too high to stabilize debt, especially amid weak growth and a rising interest bill.

⑼ Even if fully implemented, the budget would only limit the deterioration, and the debt ratio would continue to rise.

⑽ The parliamentary process can run under the 70-day constitutional deadline until December 17; given the lack of a majority in the National Assembly, the government is unlikely to secure approval through a normal vote.

⑾ The baseline scenario is that the government invokes Article 49.3 of the Constitution to pass the budget without a vote, possibly making concessions first to ensure a subsequent no-confidence motion fails, which could weaken the final fiscal adjustment.

⑿ The government is expected to survive, as opposition parties have little incentive to trigger another political crisis and bear responsibility for the resulting instability before the presidential election; legislative elections may follow the presidential votes on April 18 and May 2, 2027, potentially producing another divided National Assembly, making subsequent reforms difficult to pass, with fiscal uncertainty persisting through 2027.