France 2026 Budget: Impossible mission II

Prime Minister François Bayrou presented on 15 th July the key takeaways of the 2026 Budget and his medium-term plan for improving French public finances . What are the key takeaways? Prime Minister François Bayrou announced a set of measures aimed at achieving an effort of €43.8bn by 2026. While the public deficit was 5.8% in 202 4, the government reiterated the 5.4% target for 2025 and aims for a public deficit of 4.6% in 2026, followed by 4.1% in 2027, 3.4% in 2028, and reaching 2.8% in 2029, below the 3% threshold (Natixis: 5.5% in 2025, 5.1% in 2026 and 4.7% in 2027, chart 2 ) . The government is plann ing an effort of €43.8 bn for 2026 , with €15.5 bn in spending (State, agencies, local authorities and social security), €15.9 bn in new revenues and taxes (including the cancellation of two public holidays) and €7.1 bn related to the “ blank year” , meaning that pensions and social spending will be frozen at the 2025 amounts, even in the event of inflation ( chart 1 ). Is this budget credible? The scale and duration of the proposed budgetary consolidation would be unprecedented, particularly outside of crisis recovery phases or periods of strong growth. The proposed measures for expenditure reduction are very ambitious, while some projections for tax increases may be overly optimistic—especially concerning initiatives aimed at combating tax and social fraud. Furthermore, the specifics surrounding the solidarity contribution targeting the wealthiest individuals is lacking from detail s at this stage, which warrants caution in assessing its potential impact. Can Bayrou pass this Budget proposal ? No. In a context of a hung Parliament with only a relative majority for the government , this budget has 0% chance to pass without major concessions. However, w e believe that this is a basis for negotiating with the opposition parties, particularly the Socialist Party, which had called for a substantial effort on the wealth iest . The National Rally has already announced plans to vote a no-confidence motion if it does not reconsider its proposals, particularly regarding the higher taxes on low- and medium income households and the elimination of the two public holidays. Impossible Mission II? Prime Minister Bayrou already survived eight no confidence vote s and managed to pass the 2025 budget in a short period of time. Reaching the bar of EUR 44bn savings in next year’s budget is very high, raising t he likelihood of the fall of the government in the Autumn . Before today’s announcements, 2/3 of French people thought François Bayrou will not end the year as Prime Minister. We tend to agree with this figure and even think this likelihood has increased following those announcements.