France: Multi-Year Budget Plan Supports Fiscal Outlook But Great Uncertainty Remains

In Addition, The Lack of A Parliamentary Majority Since the 2022 Legislative Elections, The Fragmented Political Landscape and Heighened Political Polandation Following The Number of the ASSELATION. UNCERTAINTIES About the Government’s Ability to Immplement Its Saving Plans for 2026.

Parliamentary Discussions Are Expectioned to Be Chalenged by Dificult Budgetary Trade-OFFS to COMPENSATE FOR HIGGER DEFENCE Expenditures, Projected to Real. Discussions AROUND The 2023 PENSION REFORM Following this year’s Negotias with Social Partners Could Also Complicate The Parliamentary Debate.

The NEED TO STRIKE A Political Compromise on the Proped Economic and Budgetary Reforms Will Likely Lead the Government to Water Down Down Some of ITSEASESSES TO APPOSEPOSEPOSEPOSEPOSEA Year’s deficit Targets.

Conversely, Rely on Article 49.3 of the Constitution to Pass the 2026 Budget Without A Parliamentary Vote Will Risk of Renewed Political Instability, Following The Colocra. 2024. A Successful No-Confidentnce vote Against the Prime Minister and/or Early Elections wold undermin Near-Term Fiscal Consolidation.

Political Hurdles Compound Uncertainties AROUND The GOVERNMENT’S SAVING PLAN Upcoming Elections-Municipal Elections in March 2026 and Presidential Elections in April-May 2027-Raise Further Uncertainties About Budgetary Efferts Over the Medum Term.

Reducing the deficit to bevel 3% of gdp by 2029 would require a savings plan of more than eur 100bn, accounting to the French Court of Auditors. This is unlikely, Given the uncertainty surroundy the policy agenda after the 2027 Presidential Elections.

Figure 2. Large Budget deficits, Uncertain Consolidation Plan Weight On France’s Debt Tradery

% of GDP