The budget for 2025 in France represents a pivotal moment in the country's economic management, featuring a €50 billion effort in budgetary measures compared to the baseline. In a special report, Hadrien Camatte, senior economist for France, Belgium, Eurozone, considers this budget more credible than the one presented last October by former Prime Minister Barnier.
Public opinion polls highlight that the French are satisfied that compromises have been reached. Challenges for the 2026 budget, with even more limited room for maneuver and the thorny issue of extending "exceptional" measures, seem to present formidable obstacles.
Hadrien Camatte
With approximately €30 billion in expenditure cuts and €20 billion in additional revenue, the budget, while ambitious, is underpinned by economic forecasts that appear tenable, including a projected growth rate of 0.9%, an inflation rate of 1.4%, and a public deficit of 5.4%.
However, Hadrien Camatte raises concerns regarding the “exceptional” nature of the €10 billion in fiscal measures targeting businesses and wealthier households, which could potentially become permanent if economic conditions do not improve. To stabilize public debt by 2029, returning to a 3% public deficit requires the identification of approximately €120 billion in lasting savings. “Will the exception become the rule?” he questions.
Looking ahead, the situation seems complex, with the commencement of a conclave on pensions that could evolve into a significant political flashpoint while the court of accounts just released a report showing the pension system deficit will widen to €30bn by 2045. The potential for snap elections as early as July 2025 may also reshape the French political landscape.
Rating agencies could adopt a "wait and see" mode as the political situation has improved since end 2024, closely monitoring the government's ability to adhere to deficit reduction targets. Overall, the budget for 2025 poses a significant challenge that will demand rigorous management and tough decisions to ensure the sustainability of France's public finances over the medium run.
