France finds itself trapped in a deepening fiscal crisis that has become inseparable from its ongoing political turmoil. What was once Europe’s second-largest economy now struggles with a budget deficit that has spiralled far beyond European Union limits, triggering government collapses and threatening the country’s economic future.

The Scale of the Problem

France’s budget deficit has reached alarming proportions. In 2024, the deficit stood at 5.8% of GDP, representing approximately €168.6 billion. This figure, while slightly better than initially feared, is nearly double the 3% threshold mandated by EU fiscal rules. The situation has deteriorated steadily, rising from 5.5% in 2023 to what some estimates initially projected as 6.1% for 2024. The European Union took formal action against France in July 2024 for violating the bloc’s budgetary rules, placing the country under an excessive deficit procedure. France now holds the dubious distinction of having one of the highest deficits in the eurozone, alongside concerns about its public debt, which has climbed above 113% of GDP.

Underlying Causes

Several factors have converged to create this fiscal emergency. The government’s response to back-to-back crises played a significant role. France spent heavily to shield households and businesses from the economic fallout of the COVID-19 pandemic and subsequently from the spike in energy prices following Russia’s invasion of Ukraine in 2022. While these interventions were necessary to prevent immediate economic collapse, they dramatically increased public spending. Beyond crisis spending, France has maintained elevated public expenditure levels that have proven difficult to control. In 2024 alone, public spending increased by €62.8 billion compared to 2023, reaching €1.67 trillion—nearly double the initial projection. This spending growth has continued despite a slowdown in public revenue growth, creating an unsustainable trajectory. France already has one of the highest tax burdens in Europe, with revenue from taxes and social contributions totalling 45.6% of GDP in 2023—the highest percentage in the EU. This leaves limited room for increasing revenues through taxation without further straining the economy or triggering political backlash.

Political Quagmire

The fiscal crisis has become inextricably linked to France’s unprecedented political instability. Following President Emmanuel Macron’s decision to call snap legislative elections in June 2024, the country has been left with a hung parliament split into three opposed blocs: the left-wing New Popular Front, Macron’s centrist Ensemble alliance, and the far-right National Rally. None can command a majority, and French political culture’s aversion to coalition government has made compromise virtually impossible. This political gridlock has directly impacted France’s ability to address its deficit. Attempts to pass a budget with €44 billion in cuts to reduce the deficit have repeatedly failed, leading to government collapses. As recently as this week, France has experienced another government crisis, with officials resigning over the inability to achieve fiscal consolidation. French politicians remain deeply divided on the solution. The left opposes spending cuts and advocates for higher taxes on the wealthy, while the right pushes for reduced public spending. The centre struggles to find a viable path between these positions, all while the deficit continues to grow.

Economic Consequences

The consequences of inaction are mounting. Goldman Sachs recently raised its 2025 budget deficit forecast for France to 5.5% of GDP, citing likely “budget slippage.” Without meaningful fiscal consolidation, analysts warn the deficit could hover near 5% of GDP in 2026, with public debt climbing above 116% of GDP. Economic growth projections offer little relief. France’s economy is expected to expand by only 0.8% in 2025, well below what would be needed to grow out of the deficit problem. The combination of high debt, persistent deficits, and slow growth has begun to worry investors about France’s long-term fiscal sustainability. The financing burden itself has become substantial. In 2024, the deficit to be financed was revised upward to €166.6 billion, compared to the €146.9 billion initially budgeted. France has issued €285 billion in medium and long-term debt to cover these shortfalls, increasing its vulnerability to interest rate changes.

The Path Forward

France faces a difficult road ahead. Without a functioning government capable of passing a comprehensive budget, the country may be forced to operate under special laws that maintain spending near 2025 levels, keeping the deficit between 5.0% and 5.4% of GDP. This would represent a failure to make meaningful progress toward EU-mandated fiscal targets. The political calendar offers little immediate hope. Fresh elections are possible but could simply reproduce the current deadlock. President Macron, increasingly isolated politically, lacks the authority to impose solutions unilaterally. For France to escape this fiscal trap, it will need to achieve what has so far proven impossible: political compromise. This means finding a sustainable balance between spending cuts and revenue measures that can command majority support in parliament. Without such compromise, France risks a prolonged period of fiscal deterioration, potentially threatening not only its own economic stability but also creating headaches for the broader eurozone. The stakes extend beyond France’s borders. As the EU’s second-largest economy, France’s fiscal health matters for European financial stability. The longer the country remains mired in political paralysis and fiscal drift, the greater the risk of a crisis that could reverberate throughout European markets and institutions. France’s runaway budget deficit is not merely a technical economic problem—it has become the central challenge of French governance, exposing deep fissures in the country’s political system and raising fundamental questions about its economic model. The resolution of this crisis will define France’s trajectory for years to come.

• 
  European Countries Must Prepare to Evacuate Citizens Out of the UK, considering the Highest Levels of Danger to Civil & Human Rights since Brexit
  by capitalmarketsjournal
  November 20, 2025
• 
  How the Bank of England’s Balancing Act Shapes the UK Economy
  by capitalmarketsjournal
  November 20, 2025
• 
  The Sovereign Monetary Covenant: A Blueprint for Post-Debt Prosperity in the United Kingdom
  by capitalmarketsjournal
  November 8, 2025
• 
  The Dialectical Emergence of Social Movements from Economic Structures
  by capitalmarketsjournal
  November 3, 2025
• 
  China is a danger to democracy
  by capitalmarketsjournal
  October 31, 2025