The next person to sit in the Élysée Palace has a rough job ahead.
A government-commissioned report from four economists says France's public finances are on an unsustainable path.
Budget Minister David Amiel said, "Stopping the infernal machine of public debt requires collective clear-sightedness."
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If no action is taken, France's debt would surpass 130% of GDP.
Right now, France already spends a huge amount on interest payments. Since 2019, the yearly amount of medium- and long-term bonds issued has risen by over €100 billion.
To keep France's debt-to-GDP ratio from rising, the report calculates that €126 billion in total savings must be achieved across five years. This sum is equivalent to roughly 5% of annual economic output, underscoring the scale of the challenge. The economists' report calculates that without these savings, annual debt servicing costs would rise to €124 billion by 2030, crowding out investments in infrastructure, education, and healthcare.
The economists who wrote the report - Natacha Valla, Xavier Jaravel, Xavier Ragot, and Jean-Luc Tavernier - warn that putting off the necessary adjustments will exacerbate the problem. "Delaying the effort would require an even more intense effort later, concentrated over a very short period," they wrote.
The political instability over the past two years has been a key driver of France's deteriorating fiscal position. After snap legislative elections, successive governments have struggled to pass spending cuts, and frequent changes in prime ministers have spooked investors. This has led to a widening spread between French and German bond yields, making it more expensive for France to borrow. The resulting higher interest payments eat into the budget, compounding the challenge for the next president.
This political turmoil has already had tangible consequences. The yield spread between French and German 10-year bonds has widened to levels not seen since the eurozone crisis, raising France's borrowing costs. That added billions to the annual interest bill, further squeezing the budget. The incoming president will need to restore market confidence quickly to prevent these costs from spiraling.
The upcoming presidential election in May adds another layer of uncertainty. With far-right leader Marine Le Pen and centrist Edouard Philippe offering contrasting approaches, the winner will have to navigate a deeply divided parliament and public resistance to austerity. Any new president will inherit a massive fiscal squeeze from day one.
Any winner will have minimal room to offer voter incentives. The economists made clear that any new president will face a massive fiscal squeeze from day one. They said, "A significant debt is a slow poison for the economy that crowds out spending on the future to pay interest." They also warned that if markets lose confidence, it could happen fast. "The likelihood of negative effects on growth emerging would increase, and market confidence could be abruptly affected," the economists added.
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