Without a new budget, France risks a public deficit of up to 6.6% of GDP in 2025, exceeding EU limits. The European Union requires member states to keep deficits below 3% of GDP. Analysts warn that uncertainty is driving up refinancing costs for France’s substantial debt.
President Macron must appoint a new prime minister tasked with forming a government. The likelihood of adopting a new budget by year-end appears slim. If no budget is approved by December 20, extending the 2024 budget into 2025 becomes a strong possibility.
Barclays estimates that a rollover of the 2024 budget could result in a deficit between 6.3% and 6.6% of GDP. This is higher than the 6.1% expected in 2024. The bank believes that even under new leadership, the earliest fiscal adjustment may occur in early 2025.
Avoiding Shutdowns and Managing Social Security
France’s legal framework prevents government shutdowns. The current or a caretaker government is expected to propose a special law by December 19 to ensure continued tax collection. Social security benefits would remain intact even if the Social Security financing bill is rejected. Contributions would still be collected, but borrowing by the social security system may require legislative action to avoid operational disruptions.
Local governments, governed by Article 72 of the Constitution, maintain autonomy over their budgets. They can freely set expenditures during a no-budget scenario. Barclays’ analysis suggests borrowing ceilings for social security might be addressed through ad-hoc legislation.
Barclays forecasts no significant deficit reduction in 2025, projecting a 5.8% deficit. This surpasses the government’s 5% target. Economic growth estimates vary, with Barclays predicting 0.7% growth while the government anticipates 1.1%. The potential adoption of the 2025 budget early next year may slightly improve the fiscal outlook.