France has been in the throes of heightened political instability for the last two years, cycling through no fewer than five prime ministers. Lecornu’s predecessor, François Bayrou, was toppled in September over his plans to squeeze the 2026 budget by €43.8 billion, and Lecornu himself was forced to resign earlier this month just 14 hours after naming his government. President Emmanuel Macron reappointed him to the job days later.
Lecornu has put forward a budget for next year that includes €30 billion worth of savings and could narrow the deficit to 4.7 percent of GDP. But getting it approved will be a fraught process. To help ensure the survival of his minority government, the 39-year-old has promised not to use a constitutional backdoor that would have allowed him to bypass a vote in parliament to pass the budget. That leaves his draft vulnerable to dilution during the parliamentary process.
“It is really up to us — the government and parliament— to convince observers, rating agencies and financial markets,” Finance Minister Roland Lescure said last week after S&P downgrade. | Alain Jocard/AFP via Getty Images
Sheth said that Lecornu’s pledge to let the parliamentary debate happen is the type of move that is taken into account when deciding a credit rating. But she stressed that the most important thing was for France to signal it’s serious about cutting runaway public spending.
More than anything, that means reining in the cost of France’s generous pension system, by measures such as the unpopular 2023 law that raised the retirement age for most workers to 64. Lecornu has pledged to pause that measure, a concession to the left to ensure his government’s survival. The freeze will cost state finances €400 million in 2026 and €1.8 billion in 2027, which will have to be found elsewhere, Lecornu said.
When Moody’s downgraded France last year, it said that backtracking on that reform could negatively impact France’s credit.
“The suspension does mean that the fiscal risk that would have been addressed by it remains,” Sheth said.