“The moment of truth”. With this slogan, which one could read in the huge inscription behind him, the Prime Minister of France presented to his compatriots his basic directions for 2026, which provides for a tough fiscal adjustment plan to prevent the country from suffering, in 2010. consequences.
The French prime minister, for a long time, announced, among other things, cuts of 44 billion euros (1.3% of GDP) in the 2026 budget, the abolition of 3,000 public sector jobs, the abolition of two holidays and an indefinite contribution of solidarity with the teams with the highest solidarity with the teams with the highest but “Monde”, nod to the left.
Only debt interest payments, which continues to grow, and defense costs will be saved from cuts. These will increase by 10% over the next two years (about 6.5 billion euros in total), as the president announced.
It is true that it is on a clearly unsustainable fiscal course for years: the deficit was 5.8% in 2024, the second highest in the Eurozone after Slovakia.
Public debt is 113% of GDP, which is exceeded only by Italy and Greece. And, according to the Bank of France, the economy will grow by just 0.6% this year. This fiscal deterioration explains why investors demand more than France for its debt than Greece.
Only this year, the French Treasury will spend more than 60 billion euros on interest payments and, if the current course is not corrected, the distribution will reach 100 billion in 2029 and exceed the amount available for education, which has so far been the largest distribution of the budget.
In this regard, the Macron-Bayrou twin will try to reduce debt but also to finance defense to the detriment of the French welfare state: the budget for health care will be reduced by 5 billion euros, pensions, public salaries and social salaries and social benefits will be paid. Last.
In short, they are austerity policies and all this as the French welfare state has already worsened. The French National Institute of Statistics published the relevant data last week: in 2023, the country recorded the highest poverty rate in the last 30 years, with about 10 million people living below 60% of average monthly income (1,288 euros).
The government on a tight rope
Another truth is that the criticism of the bill, both from the Right and the Left, confirm that it has little chance of passing the National Assembly, in a process that will begin next October.
The Financial Times reports that Bairou has virtually bet on his government’s survival in reaching an agreement with the Socialist Party, hoping that some concessions will persuade left -wing MPs to vote on the budget in question.
If this is not the case, the government may be tempted to resort to Article 49.3 of the French Constitution, which allows for the approval of a law without a vote, a strategy that many believe can be “suicidal”. In this case, only the opposition’s divide can work in favor of Bairo, who only survived the eighth vote of no confidence, which the Socialists had promoted.
Although he has managed to survive these seven months, Bayrou is not in a state of loneliness and extreme political weakness in a parliament completely fragmented after last year’s parliamentary elections.
So he will probably face another vote after summer. But at the same time, any candidate in the 2027 presidential election would prefer to find the difficult job of the budget complete.
At the same time, a new political crisis in autumn would launch the risk premium of French debt and cause distrust in the markets, “a factor that no one can ignore within the European Union. And especially when it comes to an economy of the size and political importance of France, “says the Spanish” El Pais “.
