Budget for France: The Calm After the Storm?

France has a budget for the year 2025 following an unprecedented series of event in the history of the Fifth Republic , which ultimately demonstrated the resilience of French institutions and the country's ability to adopt a budget even in the context of a hung Parliament. This budget includes an effort of €50bn in budgetary measures compared to the baseline (versus €60 bn in the budget presented by former Prime Minister Barnier last October ), with approximately €30bn in expenditure reductions and €20bn in additional revenue. T he 2025 budget is more credible than the one presented by Mr. Barnier last October , with a projected public deficit of 5.4% in 2025. This target appears achievable , notably on the back of a potential positive surprise regarding the 2024 deficit, which will be reported on March 27. However, this budget remains a t this point a forecast with a lot of downward risks including “exceptional” revenue savings exceeding €10 bn , though we have doubts about th eir “exceptional” feature . Furthermore, the medium-term trajectory remains very fragile: stabilizing public debt as a share of GDP by 2029 is a big challenge, with a return to a 3% public deficit requiring the identification of approximately €120bn in lasting savings. What’s next ? We believe that a tricky momentum will begin with the opening of the conclave on pensions, lasting three months. We think that the end of this conclave will provide a pretext for dismissing the government, in a context of possible new snap elections July 2025. Regarding the rating agencies, the status quo is expected to prevail during their upcoming reviews, as long as the political situation remains stable, if growth is not significantly revised downward, and if France is able to show a gradual reduction in the deficit.