France demands belt-tightening in 2027 budget as investors sour on its debt
EWG•France presented a 2027 budget bill targeting €54 billion in savings, including €43 billion in new measures, to reduce its deficit. The government aims to lower the deficit from 5.4% of output this year to 5% in 2027 as 10-year borrowing costs reached 4.96%.
1. Budget savings plan
France presented a 2027 budget bill with measures including a freeze on public-sector wages and most pensions, limits on local government budgets and healthcare costs, and reduced tax breaks on employers’ payroll contributions. Finance Minister Roland Lescure said the savings totaled €54 billion, of which €43 billion were new for 2027. The plan avoids broad tax increases on households and businesses, while an exceptional surtax on the largest companies will be reduced by 30%.
2. Political and bond pressure
The bill faces a difficult path through a deeply divided parliament. Prime Minister Sebastien Lecornu said the squeeze was needed to restore control of public finances; France’s two previous prime ministers were toppled over austerity plans. The country’s 10-year borrowing costs rose to 4.96%, their highest since July 2002, as investors weighed the deficit and political uncertainty ahead of next year’s presidential election.
3. Deficit and debt targets
The government aims to reduce the deficit from 5.4% of economic output this year to 5% in 2027, with Lescure saying France could still reach the EU’s 3% limit in 2029. France’s debt reached 119% of output in the second quarter, a post-World War Two record, and the country plans to sell €340 billion in debt next year. Lescure said interest payments would account for more than half of next year’s deficit and could reach €100 billion by the end of the decade.
