The French government may be on the verge of collapse once again. According to the Financial Times, Prime Minister Sébastien Lecornu is preparing to present an austerity budget to parliament aimed at saving €54 billion (approximately $62 billion) next year. The plan involves cuts to pensions and government spending, with the goal of reducing the fiscal deficit to 5% of GDP by 2027. However, as the government currently lacks a parliamentary majority and faces opposition from both the left and the right regarding certain measures, the budget proposal could trigger a vote of no confidence—potentially costing Lecornu his job.
Lecornu is well aware that this is a high-stakes political gamble. He has openly acknowledged that the plan entails “radical” cuts to public spending and carries significant political risk. With the presidential election scheduled for next April, the government is forced to roll out austerity measures—likely to alienate large numbers of retirees, businesses, and voters—in the run-up to the polls.
However, France’s fiscal strain continues to worsen. GDP growth for this year is projected at just 0.5%—half the initial forecast—while government interest payments on debt will reach €65 billion. This figure represents a 25% increase compared to 2025 projections and exceeds the budgets for either education or defense. Lecornu warned that borrowing costs could rise by another €10 billion next year.
Investors are already demanding higher risk premiums. The yield spread between French and German 10-year government bonds has widened to 96 basis points, the highest level since the Eurozone debt crisis of 2012.
Lecornu is preparing to cut spending directly. Pension increases may be frozen, or tax breaks for retirees reduced; however, he pledged that the austerity burden borne by retirees would remain below €6 billion. Government ministries must also cut spending, with the exception of the defense budget. A surcharge on large corporations—originally announced as a one-year measure—is set to be extended, a move expected to generate an additional €5 billion in annual revenue for the government.