The French government outlined a 2027 budget proposal containing 43 billion euros in spending cuts and cost savings to address rising borrowing costs. The plan aims to lower the budget deficit to 5% of GDP from 5.4% this year, as part of a €54 billion package. These measures include tightening spending on the pension system, which is expected to cost €436 billion next year.
The proposal marks the start of negotiations with a fragmented National Assembly ahead of next spring’s presidential election. Political paralysis has fueled a sharp selloff in government bonds, with the 10-year yield approaching 5% for the first time since 2002. The yield spread between France and Germany has risen to 1.3 percentage points, signaling increased market stress.
Prime Minister Sébastien Lecornu faces skepticism about his ability to implement these cuts before the election. The government plans to borrow a record $380 billion next year, with debt servicing costs expected to rise 15% to €91 billion. President Emmanuel Macron has struggled to rein in spending, while Marine Le Pen, leading polls, pledges to lower the retirement age to 60.
Source: Wall Street Journal Markets · Summarized by HeadlinesBriefing