{"id":954284,"date":"2026-11-01T11:46:23","date_gmt":"2026-11-01T11:46:23","guid":{"rendered":"https:\/\/www.newsbeep.com\/ca\/954284\/"},"modified":"2026-11-01T11:46:23","modified_gmt":"2026-11-01T11:46:23","slug":"french-economy-at-a-standstill-as-budget-uncertainty-swirls","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/ca\/954284\/","title":{"rendered":"French economy ‘at a standstill’ as budget uncertainty swirls"},"content":{"rendered":"\n

A setback. France’s GDP fell by 0.1 % in the third quarter, the National Institute of Statistics and Economic Studies (Insee) announced<\/a> <\/a>on Friday, after stagnating in the second quarter and a 0.2% decline in the first. <\/p>\n

It is another blow for the government, with France’s borrowing costs having climbed above 5% on the financial markets last week and the social climate still highly volatile, on the eve of a new nationwide day of mobilisation against the high cost of living and in support of young people’s demands. <\/p>\n

While household consumption is accelerating (+0.4 %), the fall in output is one of the main drivers of the contraction in French GDP. It is particularly sharp in transport equipment (-3.5%), dragged down by aerospace (-4.5 %) and automotive (-1.5 %). Activity is also declining in the agri-food sector (-1.5%), which is suffering from the impact of poor summer harvests. <\/p>\n

This drop effectively leaves the eurozone’s second-largest economy on the brink of recession. At the same time, inflation has picked up again, reaching 3.4% year on year in October, compared with 3.1% in September. According to Insee, this is its highest level since January 2024. <\/p>\n

The poor figures do not come as a surprise to experts, given the particularly unfavourable macroeconomic environment. “France is highly likely to experience a technical recession over the coming quarters”, says J\u00e9r\u00e9mie Peloso, chief strategist for Europe at BCA Research, speaking to Euronews. <\/p>\n

“This scenario was already conceivable before the recent budgetary turmoil and the rout on the bond market”, he adds. <\/p>\n

Related <\/p>\n

“We will hit the wall” <\/p>\n

The government has been shaken by the news and is stressing the need to secure adoption of the 2027 budget on time, in a parliament where it has no majority. <\/p>\n

Speaking on Franceinfo, Economy and Finance Minister Roland Lescure described the French economy as “at a standstill”. He also warned that the country “will hit the wall” if the “recovery” budget is not adopted. <\/p>\n

If parliamentary talks fail, the government is not ruling out using article 49.3 of the Constitution, which allows a bill to be passed without a vote, unless a motion of no confidence is carried. Another possibility is to resort to ordinances, a procedure that has never been used to pass a budget since the creation of the Fifth Republic in 1958. <\/p>\n

According to J\u00e9r\u00f4me Mathis, professor of economics at Paris-Dauphine University and author of the blog “La finance au c\u0153ur de nos vies,”<\/a> adopting a budget is not “decisive” in itself, as it would not, “through any kind of leverage effect, miraculously revive activity in the short term”. <\/p>\n

Story Continues <\/p>\n

“On the contrary, a fiscal adjustment plan generally tends to weigh on growth in the immediate future”. The researcher points out that the issue is not just getting the government’s bill through but giving investors medium and long-term visibility over the trajectory of France’s public finances. <\/p>\n

The real issue lies in restoring the states financial credibility and its ability to rebuild investor confidence. <\/p>\n

J\u00e9r\u00f4me Mathis <\/p>\n

Professor of economics at Paris-Dauphine University <\/p>\n

France is borrowing at increasingly high cost on the markets. “Each rise in interest rates gradually feeds through into the state budget, reduces future room for manoeuvre and ultimately weighs on private investment”, J\u00e9r\u00f4me Mathis reminds us. Budget uncertainty can also become a drag on activity, he warns. “Companies postpone some investments, households defer some spending and the markets demand a higher risk premium”. <\/p>\n

As of Friday, the yield on 10-year French government bonds stands at 4.9%, 0.17 percentage points below the peak reached on 22 October. The Franco-German spread, which measures the gap between the two countries’ borrowing rates, is hovering at around 1.55 percentage points. <\/p>\n

“Yesterday’s ECB meeting, which was relatively free of surprises, certainly contributed to this easing, even though its president, Christine Lagarde, refused to comment on the French situation”, notes a strategy paper written by J\u00e9r\u00e9mie Peloso for BCA clients and seen by Euronews. <\/p>\n

Related <\/p>\n

“The main risk to the French economy is not the absence of a budget. It is the absence of visibility over the trajectory of public finances”, insists J\u00e9r\u00f4me Mathis. In this context, “the main economic cost of the current deadlock lies less in the content of the measures that would not be voted than in the prolongation of uncertainty”. <\/p>\n

Ordinances: what signal? <\/p>\n

As for a possible adoption of the budget by ordinance, the professor does not see it as “an obvious economic solution”. In his view, investors do attach importance to the speed of political decisions, but also to their “legitimacy” and their “durability”. A budget adopted by ordinance may reduce uncertainty in the short term, but is not enough to restore long-term fiscal credibility, he warns. <\/p>\n

“Markets generally prefer a contested decision to a prolonged lack of decision. But if a budget adopted by ordinance is seen as fragile, liable to be overturned after the presidential election or indicative of a lasting inability of the political system to build majorities, the positive impact on confidence could be limited”, explains J\u00e9r\u00f4me Mathis. <\/p>\n

In his view, this is precisely what distinguishes the current situation from “more classic” budget crises: markets are not questioning France’s technical ability to raise taxes or repay its debt. “They are more doubtful about its ability to slow their increase”. <\/p>\n

“As long as this question remains, pressure on interest rates is likely to persist, whatever institutional vehicle is chosen to pass the budget,” he concludes. <\/p>\n

This text was translated with the help of artificial intelligence. Report a problem : [feedback-articles-en@euronews.com]. <\/p>\n","protected":false},"excerpt":{"rendered":"A setback. France’s GDP fell by 0.1 % in the third quarter, the National Institute of Statistics and…\n","protected":false},"author":2,"featured_media":954285,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[15261,45,161,49,48,46,133,1828,1829,74172,1830,1831,39783,8123,131,2519,968,1705,2511,1832,1833,176,74173,3322,74174],"class_list":["post-954284","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-401k","tag-business","tag-business-news","tag-ca","tag-canada","tag-economy","tag-finance","tag-financial-information","tag-investing","tag-investment-tools","tag-investor","tag-market-news","tag-mortgage","tag-mutual-funds","tag-personal-finance","tag-quote","tag-real-estate","tag-retirement","tag-stock","tag-stock-research","tag-stock-valuation","tag-stocks","tag-suze-orman","tag-tax","tag-track-portfolio"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/954284","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/comments?post=954284"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/954284\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media\/954285"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media?parent=954284"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/categories?post=954284"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/tags?post=954284"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}