France has introduced a fiscal strategy aimed at ensuring debt sustainability and meeting European Union (EU) fiscal requirements. According to projections, the fiscal deficit, which is expected to reach -6.1% of GDP in 2024, is set to decrease to -5% in 2025 and eventually to -2.8% by 2029. These steps are intended to comply with the EU’s -3% deficit ceiling. Simultaneously, the debt-to-GDP ratio is forecast to rise from 112.7% in 2024 to 115.9% in 2025, before stabilizing at 115.8% by 2029. These projections reflect a gradual, disciplined approach to fiscal consolidation over a five-year horizon.
Despite these ambitions, the European Commission has expressed reservations about France’s fiscal solvency. However, the credibility of Prime Minister Michel Barnier, a former EU official, has temporarily alleviated concerns. His leadership has provided France a window of leniency from Brussels and access to the European Central Bank’s (ECB) Transmission Protection Instrument. This mechanism allows the ECB to purchase the debt of a fiscally compliant member state in response to market instability.
Political Instability and Risks
Subscribe!