France‘s new government said Monday that it aims to lower its budget deficit to between 5% and 5.5% of gross domestic product, an improvement from last year’s estimated 6.1% but still above the EU’s 3% target.
Speaking to France Inter radio, Finance Minister Eric Lombard described the country’s budget situation as “serious,” expressing concern over the deficit and outlining plans to generate €50 billion ($52.07 billion) this year.
He emphasized that businesses were uneasy over the absence of a finalized budget after the previous government was ousted for trying to pass its 2025 social security spending proposal without parliamentary approval.
Lombard said he would be meeting with political leaders this week to discuss proposed fiscal plans.
POLITICAL CRISIS
Francois Bayrou, appointed as prime minister by President Emmanuel Macron on Dec. 13, aims to present a new budget plan by mid-February.
France’s spending above Brussels’ target has already drawn disciplinary steps at the EU level.
The budget crisis stems from former Prime Minister Michel Barnier’s attempted use of a constitutional measure to pass the 2025 Social Security budget without parliamentary approval, a move that led to his ousting in a no-confidence vote on Dec. 4 after just three months in office.
The political turmoil in Europe’s second-largest economy coincides with broader European instability, including Germany’s government collapse and looming early elections, as well as major global developments like US President-elect Donald Trump’s upcoming return to the White House.
The uncertainty has rattled financial markets. Demand for French government bonds has declined, leading to rising bond yields and higher government borrowing costs.
International credit rating agency Moody’s downgraded France’s credit rating from “Aa2” to “Aa3” on Dec. 13.
Days later, the Bank of France lowered its growth forecast for 2025 from 1.2% to 0.9%, citing political instability and global economic uncertainty. For 2026, the growth forecast was revised down from 1.5% to 1.3%.