How France Lost the Ability to Pass a Budget

Economy · France

France has not lost a war, a currency or a bank. It has lost something quieter: a parliamentary majority willing to own a budget — and the markets are beginning to price the absence.

The autumn that broke the system

The collapse has a date: 8 September 2025, when François Bayrou lost the confidence vote he had called to force his 44-billion-euro austerity package through a deadlocked Assembly. He resigned the next morning, the second prime minister felled by the same parliament.

Bayrou had warned deputies they were choosing the fall. ‘You have the power to bring down the government,’ he told them, ‘but you do not have the power to erase reality.’

His plan — branded ‘Stop à la dette!’ — proposed a ‘white year’ of frozen spending, healthcare savings of 5 billion euros and the abolition of two public holidays worth 4.2 billion. The holidays did for him: the ‘Bloquons tout’ movement filled the streets on 10 September.

Four days later, Fitch delivered its own verdict, cutting France from AA- to A+ — the country’s lowest rating on record — and projecting debt of 121% of GDP by 2027 ‘without a clear horizon for stabilisation’.

Sébastien Lecornu, Emmanuel Macron’s fifth prime minister in under two years, inherited the wreckage. ‘We are paying for the instability,’ he said on his first weekend, and quietly buried the holiday plan.

The budget nobody voted for

In January, after the National Assembly failed to pass a budget through the whole of 2025, Lecornu invoked Article 49.3 of the constitution. The 2026 budget became law without ever being approved by a vote.

The tool survives because its alternative is worse. Using 49.3 permits a no-confidence motion, and the left, the centre and the conservatives each concluded that bringing down the government cost more than letting it limp on.

What passed was not what was proposed. To avoid defeat, Lecornu abandoned planned savings, raised the low-income activity bonus by 50 euros a month, indexed tax brackets and granted one-euro student meals.

Defence, interior, justice and education were spared cuts entirely; local authorities contributed about 2 billion euros. Nobody likes this budget, one negotiator said — which is precisely why it exists.

The arithmetic that no longer adds

The official target is a deficit of 5% of GDP for 2026, down from 5.1% last year — a year whose shortfall still required 152.5 billion euros, about US$175 billion, of financing. Moody’s projects 5.2% instead, noting that the improvement rests almost entirely on revenue, not spending restraint.

The debt compounds underneath. At 117.5% of GDP in March, up from 115.7% three months earlier and 110% at the start of 2024, France adds roughly a percentage point a quarter on a bad run.

The war in Iran has made a bad trajectory worse. Lecornu blames energy prices and the cost of French naval operations in the Gulf for blowing holes in assumptions that were already optimistic.

The promise to return below the European 3% threshold by 2029 now belongs to the realm of fiction. Every official knows it; the calendar of blame is what remains undecided.

The raters circle

Fitch’s September cut to A+ was the landmark, and its next decision lands as August closes, with most analysts expecting a tense status quo. Moody’s has sat at Aa3 with a negative outlook since October, warning that political fragmentation could defeat deficit control.

The pattern of the past year is the real story. Fitch, DBRS and S&P have all downgraded France within thirteen months, and only Moody’s reprieve prevented a clean sweep.

France now borrows at spreads over Germany that once belonged to Italy; its ten-year yield touched 3.47% in the autumn panic, a breath away from Rome’s. The market’s verdict is not panic but drift — a slow repricing of a country whose politics no longer guarantee its promises.

A downgrade cycle feeds itself: higher interest costs widen the deficit that caused the downgrade. France’s interest bill already rivals its defence budget, and the 2027 supply wave across Europe will not make borrowing cheaper.

The election that eats the calendar

The 2027 budget must be assembled this autumn and voted — if it is voted — in winter, less than six months before the presidential election of spring 2027. Every party is already campaigning, and budgets are the casualties of campaigns.

The parliamentary geometry offers no rescue. The Socialists, swing holders of 66 seats, demand a slower consolidation than any government can sell to the raters; the employers’ federation MEDEF threatens mobilisation against business taxes; the left wants a wealth tax the centre will not touch.

Moody’s said the quiet part in January: parties’ negotiating positions harden as elections approach, making agreement between the blocs still less likely. The agency expects the 2027 fight to be harder than the one France just survived.

Lecornu has chosen honesty as strategy. He proposes a direction now and accepts that the electorate may change it — ‘that is democracy’, he says, while conceding he is not very optimistic about his own deficit targets for either year.

The deeper question is constitutional as much as fiscal. A Fifth Republic built for decisive presidents is being governed by a fragmented assembly, and no one has found the formula that lets both be true at once.

Frequently Asked Questions

How big is France’s debt problem?

Public debt reached 3,536 billion euros — 117.5% of GDP, about US$4.05 trillion — in the first quarter of 2026, up from 110% at the start of 2024. Fitch projects 121% by 2027 without a clear horizon for stabilisation.

What is Article 49.3 and why did France use it?

Article 49.3 lets a French government pass legislation without a parliamentary vote, subject to surviving a no-confidence motion. Prime Minister Lecornu used it in January 2026 after the Assembly failed to pass a budget through all of 2025.

Why did Fitch downgrade France?

Fitch cut France from AA- to A+ in September 2025 — the lowest grade on record — days after François Bayrou’s government fell in a confidence vote over a 44-billion-euro austerity plan. It cited rising debt and political instability, and its next verdict is due at the end of August 2026.

Why does the 2027 budget matter so much?

It must be negotiated less than six months before the spring 2027 presidential election, when no party wants to own unpopular savings. Moody’s expects the fight to be harder than 2026’s — with the deficit target, and France’s remaining credibility, at stake.

This article was produced by The Rio Times’ automated newsroom system. How we use AI · Report an error · Editorial responsibility: Matthias Camenzind, Editor-in-Chief

LatAm Markets: Live Signals → — real-time movers, turnover leaders and FX across Latin America.