France Faces Market Risk as Soaring Public Debt Raises Fiscal Concerns
France’s Mounting Debt and Fiscal Outlook
Audit Office Warns of Intensifying Risks
PARIS, June 25 (Reuters) - France is suffocating under the weight of its fast‑growing public debt burden, leaving the country vulnerable to market sentiment, the public audit office said on Thursday, warning of intensifying risks in 2026 and beyond.
The Cour des Comptes said the fiscal outlook for this year is fragile, with the government targeting only a limited reduction in the deficit to 5.0% of GDP — a goal it cautioned is "far from guaranteed" amid weaker growth and rising geopolitical and inflation risks.
Debt Projections and Borrowing Costs
Debt is expected to keep rising sharply, increasing by more than €160 billion in 2026 to exceed €3.6 trillion, or around 118.5% of GDP.
At the same time, borrowing costs are set to accelerate the deterioration. Interest payments are projected to jump to about €77.4 billion in 2026, driven by higher rates on newly issued debt, outpacing efforts to contain other spending.
Constraints on Fiscal Policy and Political Challenges
Impact on Government Finances and Policy Choices
Senior auditor Carine Camby framed the situation in stark terms, saying excessive debt was already constraining France's finances and policy choices.
"Suffocation under debt is not a risk, it is a reality of our public finances," Camby told reporters, warning that the fact that France faces a presidential election next April complicates efforts to take urgent action.
Reliance on Tax Increases and Uncertain Savings
The audit office said that fiscal plans so far rely heavily on tax increases while spending restraint remains limited and uncertain. Proposed savings measures, particularly in social and state spending, are not fully documented, casting doubt on their effectiveness.
Political Instability and Budgetary Struggles
A succession of minority governments have struggled to pass annual budgets and reduce France's fiscal deficit since President Emmanuel Macron lost his majority in parliament in a snap 2024 legislative election.
Recommendations and Market Implications
Need for a Credible Multi-Year Fiscal Strategy
The audit office said the government needs to lay out a clear and credible multi‑year strategy to bring the deficit below 3% of GDP by 2029 as a first step and generate sustained primary surpluses over the long term.
Risks of Market Dependence
"Otherwise we remain at the mercy of the markets, dependent on their confidence in our ability to meet our commitments," Camby said. "In fact, we no longer have a choice."
(Reporting by Leigh Thomas, Editing by Timothy Heritage)
