France Bets on Restraint as Borrowing Costs Climb
Paris has unveiled a 2027 budget meant to calm bond markets. Getting it through a divided parliament is another matter.
Prime Minister Sébastien Lecornu's government presented its 2027 budget on 1 October. The plan aims to cut the deficit to 5 percent of GDP next year, from 5.4 percent projected for 2026. Officials put the required savings at about €54 billion. They warn that without action the deficit could approach 6.5 percent.
Markets were watching closely. On the day the budget was presented, France's 10-year borrowing rate rose to 4.94 percent, its highest level since 2002, Euronews reported. Public debt is around 119 percent of GDP and is expected to pass 120 percent next year.
What is in it
According to AFP, the plan includes:
- €5.1 billion in health savings, partly through lower reimbursements
- about €5.5 billion from retirees, as pensions above €1,260 a month would no longer rise fully with inflation
- higher receipts from VAT and income tax, alongside a modest cut in corporate tax
The plan assumes growth of 1 percent in 2027. France's independent fiscal watchdog, the High Council of Public Finances, called that forecast "optimistic".
The politics
The National Assembly has no clear majority, and two prime ministers have fallen over spending cuts since the 2024 snap election. Finance Minister Roland Lescure insists that "France's signature is solid." The Socialists called the package a "bitter austerity potion." The Greens want taxes on large inheritances and on oil companies' windfall profits instead. Some analysts expect negotiations to stretch into 2027, with a presidential election due next spring.
For holders of French bonds, owners of property in France and anyone exposed to the euro, the question is whether this budget makes it through intact. If it does not, borrowing costs could keep rising.
Sources: AFP, Euronews, EU Insider.
