^{Photo: RFI}

A New Collapse, Same Old Crisis

In yet another dramatic turn in French politics, Sébastien Lecornu resigned after only 27 days in office—the shortest stint for any recent prime minister. He is now the fifth leader to fall in less than 24 months, underscoring the depth of France’s political instability.

His departure came before any serious plans for the 2026 budget could be revealed. In fact, he never won broad support from rival parties—or even from his own allies—leaving him powerless to advance reforms, tax adjustments, or spending cuts. President Emmanuel Macron, alarmed by the political vacuum, pressed Lecornu to return within 48 hours with a credible path toward stability. Lecornu responded by promising a proposal by Wednesday evening, noting that only then could Macron “draw all the necessary conclusions.”

Behind the scenes, calls are rising from both ends of the political spectrum—some demanding Macron resign, others pressing for fresh parliamentary or presidential elections. But with little consensus in sight, the stakes could hardly be higher.

Deep Fiscal Wounds: Deficit, Debt, and EU Pressure

France is trapped in a fiscal bind it has long ignored. Its deficit is projected to reach 5.8% of GDP in 2024, and last year, its public debt surmounted 113% of GDP, positioning France among the most indebted in the European Union—behind only Greece and Italy.

These levels violate the EU’s Stability and Growth Pact, which bars deficits over 3% and caps debt at 60%. As a result, France has been placed under the European Commission’s “excessive deficit procedure.” Under new EU rules, Paris is expected to bring its deficit under control by 2029, with annual limits on how fast nominal government expenditure can rise (0.8% growth in net expenditure for 2025, for example).

Yet analysts see little reason for optimism. Antonio Fatas, an economics professor at INSEAD, flatly observed that France’s divided parliament makes compliance with EU rules almost impossible in the near term.

Adding to the pressure, rating agencies have sounded the alarm. In September 2025, Fitch downgraded France to A+—the lowest rating ever assigned to a major economy—citing unbridled political instability and a lack of credible path to debt stabilization. Agencies fear that unless the deficit falls meaningfully, France’s debt ratio could climb toward 121% of GDP by 2027.

Fitch also estimated that debt servicing costs—already among the state’s largest expenditures—could reach €67 billion this year, surpassing many departments excluding defense and education. Some forecasts even warn of a breach toward €100 billion later in the decade.

Given these risks, bond markets have turned uneasy. Ten-year French government yields have widened sharply relative to German bunds, at ~86 basis points, a gap not seen since pain points in the euro-area debt crisis.

Why Meaningful Reform Looks Out of Reach

Even if Macron and his advisors were united—and they are not—the structural and political challenges are staggering. With no one party holding a clear mandate, any proposed austerity risks alienating powerful blocs on the left or right. The far-right National Rally and left-wing factions show no interest in compromises; instead, many prefer to exploit the chaos for electoral gains.

Economists warn that the 2025 budget will likely be carried over into 2026, with little chance of a fully new plan by year-end. Hadrien Camatte at Natixis predicts the deficit will hover around 5.4–5.5% this year, with minimal improvement if any in 2026, absent bold political breakthroughs. Goldman Sachs, similarly, forecasts that budget slippage will push its 2025 deficit estimate to 5.5%, and sees little progress on fiscal consolidation in the near term. The bank also revised downward its 2026 growth outlook to just 0.8%, citing weak investment and rising borrowing costs.

Structural imbalances further complicate the matter. French public spending currently accounts for 57% of GDP, among the highest in Europe. Millions depend on pensions, social welfare programs, and subsidies—deeply entrenched systems that resist sharp cuts. Efforts to streamline and reform would likely encounter fierce political and social backlash.

Some economists speculate that Macron may be pushed toward extreme options: dissolving parliament, calling new elections, or appointing a technocratic caretaker government. Resignation, however, remains unlikely.

Zooming Out: Risks for France and Europe

France is not a small player—it is the euro zone’s second-largest economy and a pillar of European stability. The country’s unraveling governance has repercussions far beyond its borders.

Brussels officials are being pressured to step in quietly. The European Central Bank, under President Christine Lagarde, has already expressed hope that France will deliver a budget on time, suggesting that the ECB and other institutions are monitoring developments closely.

If France fails to submit a credible budget, it may resort to “special laws” or interim financing mechanisms—options used in past crises to keep the government running. But such stopgap measures carry severe credibility risks.

A prolonged default or loss of access to capital markets would shake investor confidence across the continent and could test the cohesion of the euro itself. Some commentators warn that if a country the size of France faces repeated downgrades and defaults, the entire eurozone’s stability could be called into question.

What to Watch in the Coming Days

• Whether Macron maintains his stance or unexpectedly pivots toward snap elections
• Whether Lecornu (or a successor) succeeds in cobbling together even a bare-bones majority
• How rating agencies and markets respond to any new budget draft—or its absence
• Whether Brussels will enforce stricter penalties or offer temporary leniency
• How macro indicators such as French growth, borrowing costs, and bond yield spreads evolve

In 2025, France is headed into one of the most dangerous turns in its modern history. With political paralysis gripping the republic and fiscal discipline a distant dream, any path forward will require bold leadership—even as time runs out.