France

France has weak public finances, which worsened since the Covid-19 pandemic. Its public debt-to-GDP rose to 116% in 2025, from 98% in 2019. Successive governments have failed to reduce large budget deficits, fueled by dynamic social security spending and, prior to 2024, non-funded tax cuts. With neither political block nearly close to a majority in the National Assembly since the July 2024 legislative elections, deficit reductions have become even more challenging. The suspension of the landmark 2023 pension reform further complicates the task. Without a majority, the government has relied on fragile compromises to push through budgets, sometimes with delay, which undermine the credibility of fiscal plans to reduce deficits. We expect public debt to rise to 120% of GDP by 2027 amid limited deficit reductions.

On the external front, though, France has shown noticeable progress. Its current account is now close to balance, thanks to strengthening services exports. As a result, France’s net external liabilities have diminished over the past few years, reducing the country’s vulnerability to foreign outflows.

The 2024 legislative election was a turning point in French political history. Since the introduction of the Vth Republic in 1958, France has been characterized by strong political stability. However, rising political fragmentation and public discontent have undermined this long-standing strength. The fragmented Parliament is not able to push through structural reforms that would support French potential growth, while deficit reductions have been even more challenging. The President could call fresh snap elections in 2026 amid persistent political bottlenecks, but the window to dissolve the National Assembly will narrow from H2 2026. The Presidential elections will be held in April 2027 and the election of an anti-establishment candidate could bring substantial changes in terms of policymaking.