France on a New Fiscal Trajectory

Executive Summary

France is revising its fiscal path amid slower growth and changed political strategy. France’s April 2025 annual progress report under the new Bayrou government updates its public finance trajectory submitted to the European Commission. The projected peak public debt has been revised upward to 120 % of GDP (versus 118 % previously), driven by a softer adjustment schedule and a more challenging macroeconomic outlook.

Budget consolidation is now smoother and more evenly spread. Under the prior Barnier plan, France aimed for a front-loaded adjustment — steep cuts early on to sharply reduce the deficit. The new trajectory moderates that approach: the 2025 target deficit is raised from 5 % to 5.4 % of GDP, smoothing out efforts over the 2025–2031 period. The total adjustment target, however, remains the same.

Weaker growth expectations push debt projections upward. Growth forecasts have been downgraded: the 2025 growth outlook is revised down to 0.7 % (from 1.1 %), influenced by trade tensions (notably tariff increases) and external demand weakness. This reduced momentum adds to debt dynamics, increasing financing costs and constraining fiscal leeway.

New pressures — defense, climate, investment — strain the envelope. Growing geopolitical tensions push France to increase defense spending. According to the 2023 programming law, defense outlays are set to rise toward ~2.3 % of GDP by 2030, but some officials now suggest a target up to 3 %–3.5 %. Simultaneously, climate transition demands may require upward of 0.5 to 1 % of GDP in additional annual investment. These pressures, if fully realised, could push deficits and debt far above current ceilings.

The trajectory remains broadly sustainable — if discipline holds. Despite upward revisions, the authors estimate that France has an ~84 % chance of stabilizing or reducing its debt by 2031 under the new “spring” scenario (versus ~88 % under the prior plan). The smoother adjustment path may mitigate short-term growth drag, and the debt appears not to spiral out of control, assuming no large deviations.

Key recommendations

1. Reassess fiscal rules to allow targeted investment spending (defense, green transition) to be treated with flexibility under EU frameworks.
2. Prioritise high-multiplier spending in green, digital, and educational investment to sustain growth while consolidating.
3. Coordinate defense and industrial policies at the European level to reduce duplication and costs.