The French government is pressing ahead with plans for a 'responsible' 2027 budget, even as fresh economic data and a rating agency's warning cast doubt on the country's fiscal trajectory. On Friday, Fitch maintained France's sovereign debt rating at A+ but revised its outlook from 'stable' to 'negative', pointing to weaker growth, higher borrowing costs, and a larger deficit than previously expected.
The decision came hours after France's national statistics office, Insee, reported that gross domestic product contracted by 0.1% in the third quarter, following stagnation in the second quarter and a 0.2% decline in the first. The economy, as Finance Minister Roland Lescure put it, is 'at a standstill'.
Fitch's rationale, detailed in a statement, highlighted 'the persistence of political fragmentation' and 'a difficult social climate'—with mass demonstrations across the country—as factors that 'further complicate the implementation of a sustainable fiscal consolidation'. The agency nonetheless acknowledged France's strengths: the size, wealth, and diversification of its economy, the solidity of its institutions, its euro-area membership, and the resilience of its banking sector.
Bercy's response: 'absolute necessity' of a budget
In a statement released Friday evening, Lescure said he 'took note' of Fitch's decision. He stressed the 'absolute need to adopt by the end of the year a responsible budget, which aims to restore the public finances by reducing our deficit to 5%'. The minister added that the government was 'determined to remain on a path of fiscal consolidation' and that, in an uncertain international context, it was imperative to give economic players visibility.
Earlier, speaking on Franceinfo, Lescure warned that without the budget, the country would 'hit the wall'. He repeated his mantra: 'We need a budget, we need a budget deficit of 5% or less.'
Yet the path to adoption is fraught. The National Assembly lacks a clear majority, and with the presidential election looming in 2027, political calculations are intensifying. Fitch itself noted that the debates forming six months before the vote 'have not significantly strengthened Fitch's confidence in the possibility of a lasting deficit reduction that would be likely to stabilise the debt'.
The agency, however, expects the budget to pass, thanks to constitutional mechanisms available to the government despite the absence of a parliamentary majority. Lescure has not ruled out using article 49.3 of the Constitution, which allows a text to be adopted without a vote unless a motion of no confidence is passed. Another option is to use ordinances—a procedure never used for a budget since the founding of the Fifth Republic in 1958.
Economists are divided on the merits of such a move. Jérôme Mathis, professor of economics at Paris-Dauphine University, told Euronews that a budget adopted by ordinance could reduce short-term uncertainty but would not, by itself, restore long-term fiscal credibility. 'Markets generally prefer a contested decision to a prolonged absence of decision,' he said. 'But if a budget adopted by ordinance is seen as fragile, liable to be called into question after the presidential election or as revealing a lasting inability of the political system to build majorities, the positive effect on confidence could be limited.'
The stakes are high not only for France but for the wider European fiscal landscape. As EU budget talks collide with Ukraine's funding gap, any prolonged instability in Paris could ripple across the eurozone. The government's determination to push through a deficit-cutting budget is a test of its ability to navigate a fragmented parliament, and the outcome will be watched closely by investors and European partners alike.
