Rudolph Angler France risks a 6.6% GDP deficit in 2025, more than double the EU’s 3% standard, without a new budget. Following Prime Minister Michel Barnier’s resignation, President Macron must appoint a new leader to form a government. However, the likelihood of passing a 2025 budget by year-end appears slim.
If lawmakers fail to approve a budget by December 20, the government may extend the 2024 budget into 2025. Barclays Bank predicts this scenario would yield a deficit of 6.3-6.6% of GDP, up from 6.1% in 2024. Current EU fiscal rules require deficits below 3%, adding pressure on France to curtail spending.
Barclays’ analysis considers the political uncertainty too high to revise forecasts, but notes a new government could enact fiscal adjustments by early 2025. With these changes, a 5.8% deficit—lower than Barnier’s proposal but still above the EU limit—might be achievable.
Legal Framework Averts Shutdown but Leaves Questions
Unlike the U.S., France’s legal system prevents a government shutdown. A special law, likely to be introduced before December 19, could ensure the collection of taxes in 2025. Social security benefits will also continue, though funding authorizations may require new legislative measures.
The French social security system typically raises market funds up to a government-approved ceiling. Without a budget, the Senate may incorporate borrowing ceilings into an ad-hoc law to keep social funds operational. Local governments, governed under Article 72 of the Constitution, will independently manage expenses in the interim.
Barclays predicts no significant deficit reduction in 2025, even with an approved budget. The bank estimates a 5.8% GDP deficit and 0.7% economic growth, lower than the government’s 1.1% projection. Early 2025 budget adoption could still allow some fiscal improvement, but major adjustments remain uncertain.