France is trapped between competing pressures: protesters demanding more public spending and financial markets insisting on fiscal discipline. The Guardian reported that student protests have erupted as President Emmanuel Macron prepares to leave office in 2027, while investors grow increasingly concerned about the government's failure to control spending. Yields on 10-year French bonds recently hit their highest level since July 2002, just short of 5%, signalling market anxiety. France's debt-to-GDP stood at 115.6% in 2025, with a budget deficit of 5.1%, significantly worse than the UK's 94.3% and 4.3% respectively.
Political deadlock is preventing action. After parliament was deadlocked following the 2024 snap election, Macron's plan to raise the pension age stalled at 62 and nine months rather than the intended 64. Finance Minister Roland Lescure has promised to reduce the deficit after it rose to 5.4% this year, but has not explained how. A survey by Medef, France's largest employer federation, found 82% of firms were pessimistic about the next government's economic policy, while 66% said their business would become vulnerable or even face bankruptcy if deadlock continued for five years.
The political outlook has spooked investors further. A potential runoff between far-right leader Marine Le Pen and far-left politician Jean-Luc Mélenchon in next year's presidential election has raised concerns about France's future in the eurozone. Le Pen has promised to lower the retirement age to 62 while introducing a debt brake, a contradiction that has confused markets. Erik Britton of Fathom Consulting warned that Le Pen's election could mean a 20% risk of France leaving the euro.
Economists warn of serious consequences. Antonio Fatas at business school Insead said France has been pushed to the edge of financial collapse, describing the political situation as cause for panic. Nobel Prize-winning economist Paul Krugman recently suggested France may have crossed from too big to fail to too big to save. Without a budget agreement that gains parliamentary support, France could face pressure to default on its debts.