Europe Blog: France - The mounting pressure on next year's public deficit

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Europe Blog: France - The mounting pressure on next year's public deficit

Deutsche Bank

Research

Economics Date

Europe Blog 15 May 2026

France - The mounting pressure on next

Yacine Rouimi year's public deficit

Senior Economist

+44-20-754-71014

We see the French public deficit reach 5.2% of GDP in 2026 and 5.3% in 2027.

While the government's near-term discipline should keep the 2026 deficit close Mark Wall

to its target, this masks an underlying deterioration. The primary risk is not a Chief Economist

+44-20-754-52087 manageable cyclical deterioration this year, but the embedding of the current

inflation shock into the 2027 budget through automatic spending increases and

revenue lags. This passthrough, compounded by pre-existing fiscal pressures,

sets the stage for a more challenging battle for fiscal sustainability from 2027

onwards.

2026: A focus on near-term containment. The government's response to the Gulf

crisis has so far been one of fiscal discipline, focused on holding its 5.0% deficit

target for 2026. This appearance of near-term stability is built on two key factors.

First is active fiscal containment: Paris has ruled out broad-based support

measures and has frozen EUR 6bn in existing credits to neutralize the direct –

estimated – impact of the crisis. Second is a pre-existing buffer: the official 2026

deficit target was never revised down after the better-than-expected 2025

outturn (5.1% of GDP vs a 5.4% target), which implicitly created a cushion for the

deterioration we now anticipate. The primary risk to the 2026 target is therefore

not policy slippage, but a cyclical downturn.

Figure 1: Only a deep, simultaneous collapse in oil and gas prices would avert inflation jumping in 2026.

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Source: Deutsche Bank Research