France: problematic debt and political disaffection

Tackling the high level of government deficits and debt levels go hand-in-hand with political disaffection in France. The last 18 months have seen little progress in braking this link. President Macron’s centrist Renaissance party did poorly in European elections in June 2024. Macron reacted with a snap general election, hoping it would strengthen his support, but the opposite was the case. The result was an almost equal three-way split between Marine Le Pen’s far-right National Rally (RN), the left-wing New Popular Front and a centrist grouping including Macron’s. France has experienced significant political instability recently, with five different prime ministers appointed in less than two years. The current Prime Minister, Sébastien Lecornu, was originally appointed on September 9, 2025, resigned less than a month later on October 6, 2025, but was reappointed by President Macron on October 10, 2025. The hung parliament and ongoing struggles to pass a budget remain France's biggest problems. Locornu will likely eventually succeed in passing some type of budget, but one which is unlikely to reduce the budget deficit.

The spread between French and German government bond yields remains the key barometer of the political and fiscal tensions. It has been at a heightened level since summer 2024. The prospect of a renewed narrowing seems slim. French government finances are deeply unsustainable, with the government debt/ GDP ratio almost certain to continue trending higher in the coming years.