Between an economy that has almost stopped growing, public finances exhausted by debt, and a street that is regaining the language of protest, France finds itself facing a very complex equation. The government is required to calm demands related to wages, purchasing power, and public services, but at the same time it is preparing for an austerity budget that is supposed to reduce spending by billions of euros, while the country is approaching a presidential election that will increase the sensitivity of any economic decision.
It is not easy to find positive indicators when reviewing the performance of the French economy this year, as official numbers reflect the extent of the pressures the country is facing. On the ground, on September 29, a new wave of demonstrations and strikes began, with marches and gatherings of firefighters who played a decisive role in fighting last summer’s fires, before they were joined by public sector employees in response to union calls, and then by public secondary education students demanding improved study conditions. The list of demands does not seem likely to stop there.
The unions plan to escalate their action on October 17, in protests that include the high cost of living and the decline in purchasing power, in addition to demanding a general increase in wages, raising school and hospital budgets, hiring more workers and improving working conditions. In parallel, activists from the “Yellow Vest” movement are preparing to return to the streets and roundabouts, to protest against the rise in the prices of energy derivatives, and to demand freezing them and imposing higher taxes on companies operating in the sector.
This movement brings to mind the wave of protests that France witnessed in 2018 and 2019 under the banner of the “yellow vests,” which at some stages turned into confrontations, acts of violence, fires, sabotage of property, and clashes with security forces. These scenes are still fresh in French memory, which gives the return of the current protests an additional sensitivity, especially in light of the economic and financial pressures that the country is facing.
In light of the expansion of social demands, the government of Sebastien Le Cornu finds itself with a narrow margin of response, while it fears that the wave of protests will intersect with the political mobilization that precedes the presidential elections scheduled for the spring of 2027.
This comes at a time when inflation is regaining its momentum, as the National Institute of Statistics and Economic Studies announced that the inflation rate in France had risen from 2.6 percent in August to 3.4 percent in September. High prices increase pressure on families, especially the lowest income segments, while eroding their purchasing power.
In the face of rising fuel prices, the government resorted to providing financial assistance to those affected by the increase in gasoline and diesel prices, while the pressures resulting from gas and electricity prices continued.
On the other hand, the government is preparing to present the draft 2027 budget on Thursday, at a time when it is moving towards austerity and cutting spending, which makes it difficult for the new financial measures to meet most of the demands raised by the protesters.
The government aims to achieve savings of 54 billion euros by reducing spending and pursuing items that it considers unnecessary, while its proposed measures include pensions.
Financing needs reveal the extent of the pressures facing French public finances. Paris is preparing to borrow about 340 billion euros in 2027, while its debts are approaching 3.6 trillion euros, according to government sources, an increase of about 60 billion euros from its level at the end of March.
This situation puts the government before a difficult equation: containing social pressures at a time when public finances require reducing spending, while the approaching elections increase the sensitivity of decisions related to wages, services, and social spending.
Weak growth and deteriorating public finances increase the cost of France’s borrowing from the markets, as some of its bond yields reach about 4.8 percent. This comes at a time when the growth of the French economy during 2026 is expected to be limited to about 0.05 percent, which is one of the weakest growth rates in the European Union.
In contrast, the debt amounted to about 119 percent of GDP, far exceeding the ceiling set in European Union rules at 60 percent. The cost of servicing debt is also increasing, with interest payments expected to reach about 79 billion euros by the end of this year.
The severity of the transformation becomes clear when comparing the current situation to what the French debt markets were between 2019 and 2021, when the yields of some government bonds fell to negative levels. This environment allowed Paris to borrow at very low costs, while in some cases investors accepted a negative return in exchange for holding French bonds.
Today, the cost of French borrowing has risen to levels exceeding those recorded in a number of European economies that traditionally faced greater pressure in the debt markets, including Greece, Spain, and Italy. The spread between French and German bond yields also widened to more than 1.2 percentage points, an indication of the high risk premium required by investors to finance France.
As debt continues to rise and growth weakens, the sensitivity of French public finances to interest rates increases; The higher the cost of borrowing, the larger the portion of the budget allocated to debt service, which narrows the scope for spending on public services, social policies, and investment.
The pressures facing the French budget cannot be separated from the energy crisis, which has increased its cost by about 9 billion euros in 2026, at a time when these pressures do not appear to abate in the near future. Prime Minister Sebastien Le Cornu is likely to face a difficult task in passing the draft 2027 budget before Parliament, especially the National Assembly, in light of the approaching presidential elections and the increasing political calculations that accompany it.
As the electoral deadline approaches, the political blocs may find themselves facing increasing pressure to take into account the repercussions of any austerity budget on their electoral bases, thus opening the way for difficult negotiations and conflicting parliamentary demands. This is particularly important in light of the experience of last year, when two governments fell after failing to secure the necessary majority to pass the 2026 budget, which prompted Le Cornu to make concessions to Socialist Party deputies in an effort to secure the necessary support for its approval.
Despite the financial pressures, the French economy still maintains great weight at the European and global levels. According to World Bank data for the year 2025, France ranks second among the European Union economies in terms of gross domestic product, after Germany, with its output amounting to about $3.366 trillion, compared to $5.051 trillion for Germany. On the broader European level, France comes in third place after Germany and Britain, with an output of about 4.003 trillion dollars.
Globally, France ranks seventh in terms of GDP, according to the same data, behind the United States, China, Germany, Japan, India, and Britain. Its economic weight, along with its permanent membership in the Security Council and its nuclear capabilities, gives it political influence that exceeds the weight reflected by the size of its economy alone.
But the current financial and economic pressures may make it more difficult to maintain this weight within the European Union, as France and Germany have for decades been a major axis in advancing the European integration process. As the end of President Emmanuel Macron's second term approaches in the spring of 2027, the importance of the next presidential election for French economic and financial policies increases, at a time when the rise of the nationalist right, led by the National Rally party, raises the possibility of transformations in a number of files, including financial and economic policy.
