Published by Global Banking & Finance Review®
Posted on April 22, 2026
2 min readLast updated: April 22, 2026
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PARIS, April 22 (Reuters) - Uncertain economic conditions and possible changes in interest rates could throw France's effort to trim its deficit to 3% of output by 2029 into doubt, France's fiscal watchdog said on Wednesday.
The conflict in the Middle East has scrambled the outlook for France and the broader euro zone, as oil and gas costs have surged.
Last week France's finance ministry cut its 2026 growth forecast slightly to reflect the fallout from the conflict, predicting the euro zone's second-largest economy would grow 0.9% instead of the 1% it had previously expected, and raised its inflation estimate to an average 1.9% from 1.3%.
And in March, overall inflation in the 21 countries sharing the euro currency jumped to 2.5% from 1.9% a month earlier, though the hike was smaller than expected and core inflation declined.
The European Central Bank is weighing a rise in interest rates to prevent the surge in energy costs from becoming entrenched in the prices of other goods and services.
In France, the High Council for the Public Finances, which is mandated by law to examine the government's budget plans, said in a report that plans to cut public spending may not be enough to reduce the deficit due to other uncertainties.
"Even if the net primary spending trajectory is maintained, the actual reduction of the deficit to below 3% of GDP by 2029 is subject to uncertainties, particularly regarding economic conditions, interest rate trends, and the response of revenues to growth," it said.
France, which has one of the largest budget deficits in the euro zone, has said it will offset the economic fallout from the Iran crisis by freezing some spending.
(Reporting by Makini Brice; Editing by Toby Chopra)
Uncertain economic conditions and potential interest rate hikes could undermine France's efforts to reduce its deficit to 3% of GDP by 2029.
Inflation projections for France have increased, with the finance ministry raising its estimate to 1.9% and EU inflation jumping to 2.5% in March.
The conflict has led to higher oil and gas costs, affecting France's growth forecasts and increasing inflation risks.
France plans to freeze certain spending to offset economic impacts from the ongoing Iran crisis and higher energy prices.
The High Council for the Public Finances assesses government budget plans and warns of uncertainties affecting deficit reduction.
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