France’s Economy Minister, Eric Lombard, has announced that the country’s budget for 2026 will be particularly stringent as the government continues its efforts to reduce the public deficit. His statement comes after legislators recently approved the 2025 financial plan following intense debates and political challenges.
France’s Deficit Reduction Strategy
Lombard emphasized that France has mapped out a clear strategy to lower its public deficit. The goal is to bring it down to 5.4% of the national GDP in 2025, with a long-term target of reducing it below the European Union’s mandated 3% threshold by 2029. Under EU fiscal regulations, member states must maintain a deficit below 3% of their GDP.
“2026 will be a very challenging budget year as we continue to cut the deficit, aiming for a level below 5.4%, and possibly even under 5%,” Lombard stated. However, he noted that the final target remains flexible and subject to further discussion.
Seeking Political and Economic Consensus
To achieve these fiscal objectives, the government plans to collaborate with all political parties, trade unions, and business leaders. Lombard stressed the importance of reaching a national consensus on key policies that will enable responsible spending reductions in 2026 without compromising essential public services.
Economic Uncertainty and Investor Confidence
Political instability and fiscal concerns have contributed to market unease in recent months. Lombard acknowledged the negative impact on economic growth but expressed optimism that investor confidence will be restored.
France’s economic performance has shown signs of slowdown, with a 0.1% contraction in the fourth quarter of 2024 following a 0.4% growth in the previous three months. However, the Bank of France projects a modest GDP increase of 0.1% to 0.2% in the first quarter of 2025, supported by expected growth in market services and the energy sector. The International Monetary Fund (IMF) forecasts a 0.8% expansion of the French economy for the full year 2025.
Pension Reform Back in Focus
With the 2025 budget now finalized, attention has shifted back to President Emmanuel Macron’s highly contested 2023 pension reform, which aims to gradually raise the retirement age from 62 to 64. The reform is designed to ensure the financial sustainability of the pension system amid an aging population.
France’s newly appointed Prime Minister, François Bayrou, has indicated that pension reform discussions could return to the legislative agenda. Observers view this as a crucial test of France’s commitment to reducing its fiscal deficit.
“I have full confidence in both workers and employers,” Lombard told CNBC. “They understand their responsibility to propose adjustments. They have three months to reach an agreement, and if they do, it will be presented to Parliament. We hope it will become law this year.”
Financial Outlook and Market Reactions
Earlier this month, credit rating agency Fitch expressed concerns over potential delays or reversals in France’s fiscal consolidation efforts. The agency warned that any significant setback in reform implementation could negatively impact the country’s medium-term financial stability.
As France navigates these economic challenges, the coming months will be crucial in determining how effectively the government can balance fiscal responsibility with social and economic stability. The outcome of the 2026 budget discussions and pension reform debates will play a pivotal role in shaping the country’s financial future.
