France at a crossroads

Bayrou's leap forward is likely to fail

Next Monday, the French Parliament will hold the vote of confidence tabled by Prime Minister Bayrou, and anything other than a clear defeat for the government would be a big surprise. This is because the government does not have a majority in Parliament, and virtually all opposition parties have already announced that they will withdraw their confidence in Bayrou's government. This means that Bayrou is likely forced to announce his resignation after less than nine months in office.

Without reforms, the debt ratio will rise sharply

Like his predecessor Michel Barnier in December 2024, Bayrou would then have failed due to a dispute over the budget for the following year and the reforms it contained. Having already pushed through initial measures in February, which are expected to reduce this year's budget deficit from 5.8% to 5.4%, the 2026 budget now aims to reduce the deficit ratio to 4.6% through savings and tax increases of more than €40 billion. Among other things, social spending would haven been frozen for one year and two public holidays would have been scrapped. In the coming years, the deficit ratio was to be further reduced and reach the Maastricht ceiling of 3% at the beginning of the 2030s.

If these plans were implemented, our calculations show that the government debt ratio would stabilize at just over 120% in the coming years. However, even then, no significant decline in the already very high debt ratio would be expected. Instead, France would continue to have the third-highest debt ratio of all euro area countries after Italy and Greece.

For full text see attached PDF-Version.