France can no longer rely on tax increases to control its public finances and must decisively shift its focus to cutting spending as it faces a second consecutive year of public finances under pressure, the national audit court warned on Thursday.
The government’s deficit target of 5% of GDP for 2026 — which had already been relaxed from the initial 4.7% — remains “highly uncertain” after parliamentarians ruled out several important savings in the social security budget, the Cour des Comptes, the French Court of Auditors, said in a report on the state of public finances at the beginning of the year.
The Court stated that the government’s budget for 2026 relies excessively on around 12 billion euros in additional taxes, mainly on the almost complete extension of an additional tax on large companies.
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Other revenue-boosting measures originally proposed have been abandoned or watered down, and the public finance watchdog has warned that the remaining measures could underperform if inflation falls below expectations or if companies make adjustments to limit the impact on profits.
Considering that France already has the highest tax burden in the euro zone, the Court stated that further increases to reduce the deficit “would risk harming competitiveness and affecting employment”, making spending cuts inevitable.
However, the expenditure side of the budget also carries significant risks.
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Expenses are expected to increase by just 0.3% in 2026, considering inflation, in an unprecedented slowdown, but the Court warned of likely budgetary excesses after parliament ruled out measures such as increasing medical co-payments and freezing pensions.
Even if the deficit target for 2026 is met, France’s debt would still rise to 118.6% of gross domestic product (GDP), making the country more vulnerable to rising interest rates and subject to a greater spending squeeze later in the decade.
