France has put its budget on the table, and markets are not convinced. Prime Minister Sébastien Lecornu's minority government presented the 2027 plan on Thursday, promising to shrink the deficit to 5% of GDP next year from a projected 5.4% this year. Within hours, the country's own fiscal watchdog said the numbers rest on hopeful assumptions.
The government says it needs about 54 billion euros of savings. Without action, it warns, the deficit could reach 6.5% of GDP. The measures include caps on pension indexation, a freeze on the wage index for public-sector workers and changes to state-backed sick-leave schemes. BNP Paribas estimates that pensions and healthcare each carry around 6 billion euros of cuts, and that compulsory levies would rise to 44.2% of GDP. Interest payments alone add another 0.4 points of GDP to the bill.
The plan assumes growth of 1% in 2027. It would still leave public debt rising, from about 119% of GDP now to above 120% next year, until the deficit falls toward the EU's 3% ceiling.
France's High Council of Public Finances, known as the HCFP, issued its opinion the same day. It called the government's economic scenario optimistic. In particular, it said, the forecast assumes a strong pick-up in private investment even though surging sovereign borrowing costs are likely to feed through to what firms and households pay for credit.
Those costs are the backdrop for everything. The gap between French and German 10-year yields has widened sharply in recent months and briefly passed 130 basis points, the most since 2012. Lecornu himself told ministers and lawmakers that "reality is catching up with us" and urged them not to "add instability" while the state and social security budgets go through.
The politics are brutal. The government has no majority, trade unions have called strikes, and left-wing parties call the package austerity. BCA Research's Jeremie Peloso expects "substantial back and forth" between the government, the National Assembly and the Senate that could run deep into the first half of 2027. A presidential election next year, with Marine Le Pen's National Rally ahead in polls, hangs over every vote.
France is not alone. Governments across the bloc are finalising budgets before the EU's mid-October deadline. Italy presents its plan on Friday, Belgium holds high-stakes talks this weekend and Ireland unveils its budget next week. The Czech Republic, long a fiscal hawk, is heading the other way, with a 2027 draft that is one of the EU's biggest fiscal expansions.
This budget is a test of two things at once: whether Paris can persuade bond investors, and whether it can persuade its own parliament. If growth comes in below 1%, the savings will not be enough and the deficit target slips. If lawmakers water down the cuts, the same happens. Either way, France is now the eurozone's most closely watched budget, and Brussels will read it against the other capitals' numbers in the coming days.
