Debt of the nation: Bayrou and Macron or the reckless tactic of the politics of fear
The French government finds itself in a delicate financial situation, with Prime Minister François Bayrou presenting a plan for €43.8 billion in efforts for the 2026 budget back in July 2025. The plan, aimed at restoring public finances and reducing the national deficit to 4.6% of GDP, includes significant spending cuts, new taxes, and social benefit freezes.
However, the political landscape is fraught with instability. Bayrou has survived multiple no-confidence motions amid low presidential approval and parliamentary deadlock. On July 30, French government spokesperson Sophie Primas posed a series of questions about the potential consequences of a censure, a topic not previously addressed.
The questions concern the country's future, the IMF's and rating agencies' views, the impact on businesses, and the impact on the French public's future. The specific nature of these concerns was not previously discussed.
The plan, described as a "last resort" for avoiding a financial crisis, has been met with a mix of reactions. While some view it as a "danger," others see it as a "last stop before the cliff" and a means to avoid being "crushed by debt."
François Bayrou's plan includes measures such as freezing social benefits and income tax brackets, reforming unemployment insurance and pension schemes, and increasing taxes on the wealthy. However, the contentious budget items, such as cutting bank holidays and social spending freezes, have provoked criticism from left and right factions and civil society groups, raising uncertainty about parliamentary approval.
Economically, the plan risks slowing economic growth, with experts warning that the fiscal consolidation is unprecedented outside crisis or strong growth periods. The cuts will impact household demand and public spending, but business sectors are relatively spared.
Regarding France's economic vision with the IMF and rating agencies, the budget's focus on deficit reduction aligns with EU and international expectations for fiscal discipline to maintain creditworthiness and rating stability. However, the risk is that overly ambitious cuts may dampen near-term growth and public support.
Businesses see the plan as sparing them direct fiscal pressure, but the broader economic slowdown and social tensions could indirectly affect investment and consumer demand. Employer groups and NGOs have expressed concerns about the social impact of cuts, especially in healthcare and international aid.
In a nutshell, the 2026 budget plan by François Bayrou is a fiscally ambitious program aiming to reduce the deficit significantly through broad spending cuts and revenue measures. It reflects a vision to stabilize public finances and comply with EU fiscal rules but faces political instability, social controversy, and expert warnings about growth suppression. Its reception by the IMF and rating agencies will depend on implementation credibility and political cohesion, while businesses remain cautious due to indirect economic risks.
- The French government, in a delicate financial situation, is planning to seek €43.8 billion in efforts for the 2026 budget, with a significant focus on finance to restore public finances and reduce the national deficit.
- The IMF and rating agencies will evaluate the 2026 budget plan proposed by François Bayrou, considering its alignment with EU fiscal rules and its potential impact on creditworthiness and rating stability, given the plan's fiscally ambitious approach and the associated risks of growth suppression.
