Source: Le Grand Continent, Scope Ratings
Steady Rise in Public Debt Remains France’s Main Economic Challenge
We have highlighted that France’s stretched public finances and high political polarisation already limit the sovereign’s room for policy manoeuvre, which are precisely the risks either parliamentary outcome will likely reinforce.
Expansionary fiscal policy platforms across much of the political spectrum of France thus restrict the prospects of material public-debt reductions in coming years, limiting the country’s ability to withstand future shocks. Whatever the outcome of the second round in the elections, the fiscal trajectory outlined in the 2024 stability programme, with a budget deficit returning below 3% of GDP by 2027, is out of date.
Any new government will have limited fiscal space due to France’s elevated fiscal deficit (5.5% of GDP in 2023) and public debt stock (110.6% of GDP). The consequences of the elections for public finances will depend on the next government’s policy priorities, ability to implement them, and the response of EU institutions as well as market reactions and the magnitude and persistence of any renewed weakening of funding conditions.
Hung Parliament Could Limit Fiscal Slippage but Halt Reform Momentum
The first round shows that France may face a period of political stasis, with potentially neither the National Rally nor the New Popular Front securing an absolute majority after the second round. While this configuration could complicate the 2025 budget-adoption process, it would likely reduce fiscal-slippage risks associated with both groups’ expansionary fiscal policies on which they have campaigned.
