Overview
Last week, French President Emmanuel Macron appointed Sébastien Lecornu to be his new prime minister, becoming France’s third in about one year. Lecornu, a Macron ally, faces a difficult political outlook: he needs to secure the support of opposing parliamentary blocs to ensure his survival, but, with contrary ideas on how to plug France’s fiscal hole, assembling such a coalition will be a Herculean task. The stakes are high, with France’s political instability and growing deficits (the third highest in the EU) denting its credit ratings and raising bond yields to levels near Italy and Greece. If unable to resolve its fiscal issues, France will risk its leadership at the EU level—including its advocacy for pro-growth reforms—in addition to its ability to attract foreign direct investment (FDI) or expand defense industrial investment.
France’s Spectacle Politics, Explained
Sébastien Lecornu’s appointment reflects France’s endemic political gridlock after inconclusive July 2024 snap elections. The extremes control the majority in the French Parliament, squeezing the center’s ability to govern independently. On the left, a former (now defunct) alliance between several parties—France Unbowed, the Greens, the Socialists, and the Communists—together hold 178 seats (31%), while the far-right populist National Rally and allies hold 142 (25%). Macron’s party, Ensemble, and its allies hold the French center with 150 seats (26%), far ahead of the traditional center-right party, the Republicans, who hold 39 (5.1%). This math has only gotten messier since the fracture of the left alliance, with the Socialists’ 66 members (11% of seats) in regular friction with France Unbowed’s 72 members (12%). The inability of a faction to command a majority in the French parliament is an exception in the Fifth Republic, putting strain on what was designed to function as a majoritarian system with two main blocs.
President Macron, doubting the longevity of the left alliance, opted to overlook their ranks for prime minister, first choosing the center-right Michel Barnier from the Republicans. He lasted about three months before handing the baton to François Bayrou, a centrist from Macron’s bloc. Bayrou’s position was vulnerable from the start. He first survived passing the 2025 budget via Article 49.3 in March, a move that allows bills to pass the National Assembly without scrutiny but gives the opposition a 24-hour window to call a no-confidence vote (this same provision enabled Macron to raise the retirement age in 2023). Bayrou survived a second ouster attempt after pension reform talks in June failed, which removed the Socialists’ tacit toleration of his leadership.
Bayrou tested his luck again for the third time in early September, calling for a no-confidence vote against himself after proposing a controversial 2026 budget in a strange gambit to test the willingness of the opposition to topple the government. This act of political suicide has brought France to its current moment, with no budget passed amid a worsening fiscal position. Macron’s move to crown another ally, Lecornu, as opposed to negotiating an agenda with one of the opposing factions, like a left-wing party or the National Rally, or even calling snap elections, will continue to restrain France’s legislative capability. Lecornu’s task—assembling a government and passing a 2026 budget—remains steep.
The Scale of France’s Economic Challenges Is Daunting
France’s polarized budget talks must tackle a large budget deficit and restore confidence in the French economy. Austerity is a tricky game, both technically and politically. As it stands, political factions disagree on how the government should balance its budgets: the left wants to restore or expand wealth taxes, while the right seeks dramatic expenditure cuts. Barnier embraced some spending cuts and marginal increases in corporate and electricity taxes, ultimately saving a projected €60 billion, but this did not pass Parliament’s scrutiny. Bayrou attempted to find more creative solutions without tax increases, including by axing two public holidays, distributing welfare benefits in a single package, and asking for a “solidarity contribution” from the affluent. Likewise, this failed to gain support.
These desperate attempts reflect the scale of France’s fiscal woes. The 2024 budget deficit (5.8%) is nearly twice the EU-mandated limit of 3% and slipped far higher than original government projections (4.4%). France’s government debt has reached €3.35 trillion, corresponding to 113% of GDP, and ten-year bonds are nearing the same levels as Italy and Greece, the EU’s traditional fiscal troublemakers, at roughly 80 basis points ahead of Germany’s bonds. Interest payments are projected to reach €66 billion, higher than France’s annual military spending. In looming fiscal trouble, the Fitch credit ratings agency decided to downgrade France’s credit rating in September from A+ to AA-, following similar moves from S&P Global Ratings and Moody’s in December, shortly after Barnier’s sacking. Two prime ministers in one year—and big names no less—is a testament to investor fears that France’s unprecedented political polarization will prevent any easy fix.
To make austerity measures worse, France’s negative fiscal outlook is accompanied by slow growth. The European Commission currently projects France to slow down to 0.6% GDP growth in 2025 from 1.1% in 2024. This puts growth below inflation, which the OECD estimates will reach 1.2% in 2025. Global trade uncertainty has also hurt consumer spending across the EU, which will reverberate into France’s total exports, expected to contract by 0.1% in 2025. Years of inflation and higher energy prices, partially due to the shock of the Russia-Ukraine war, have continued to stunt consumer confidence and keep personal savings high.
These economic indicators have political consequences. Economic stress corresponds to low favorability for Macron (21%) and Bayrou (12%), and Macron’s party, Ensemble, polls at its lowest point since its founding in 2017, at roughly 15%. The inverse is true for National Rally, most recently polling around 32%, despite Marine Le Pen’s likely court-issued ban from running for President in 2027. Resolving France’s fiscal troubles in a way that will be felt by voters before presidential elections will be difficult, potentially ushering in Eurosceptics in the EU’s second-largest economy. Macron’s decision to appoint another ally as prime minister has angered French union workers, who, fearing Bayrou-style social spending cuts, drew upwards of 400,000 demonstrators in a September 18 strike.
France’s Political Crisis Will Reverberate Across Europe
In some ways, France’s political crisis is not unique. Like other European democracies, slow growth and inflation have fueled the rise of political extremes on the far left and right. Before, there were only a handful of parties that vied for power, but now the presence of many parties is squeezing the relative power of the established center. The main contextual difference is that France is not a traditional parliamentary democracy but a semi-presidential system with a powerful executive—there is no need to form coalitions to approve a government or a prime minister, and with the lack of incentive, Macron has not been keen on inter-party talks so far. Indeed, with the National Assembly in a standstill, more power has been concentrated in the hands of the Presidency for the legislative agenda (namely through Article 49.3) and in foreign policy autonomy—a trend that could outlast Macron. This may bite the political center if, say, the National Rally captures the Presidency and gains expansive leverage to shape France as it pleases, which could introduce policy uncertainty.
France’s fiscal and political challenges, reinforcing each other, also act as sobering constraints on the country’s agency. In generalizable terms, France’s vision for the EU is more expansive than its peers, namely Germany—it has been the leading proponent of fiscal integration, common debt, and adopting strategic autonomy as the bloc’s foreign policy. Now, with France struggling to service its own debt and navigating a downgraded credit rating, demand in its bond market (previously the largest in the Eurozone) may become smaller than Germany’s, which is benefiting from a defense-driven expansion. Germany and the fiscal hawks will likely gain additional steering power of the EU’s agenda, pushing back against EU-based defense coordination, “Buy European” requirements in defense spending, integrating capital markets, or promoting trans-European mergers. A more intergovernmental style of EU coordination—one less fit to defend the sovereignty of the EU as an independent geopolitical pole—could take shape from France’s lack of leadership. France’s fiscal problems may undermine its foreign policy leadership, including within a “coalition of the willing” to police the peace in Ukraine.
Lecornu’s Next Steps and the Risks
For his government to survive, Lecornu must acquire the support of another bloc in Parliament. His first steps have been to negotiate with the Socialists, led by Olivier Faure, whose support will be crucial for preventing the success of a no-confidence vote. Despite this, an alliance between the Socialists, Ensemble and its centrist allies, and the Republicans—a fractious triple-bloc centrist coalition—would only comprise 44% of seats, not quite a majority with legislative prerogative but likely enough to stave off a no-confidence vote. A bargain with the Socialists may mean undercutting Macron’s policies—such as reversing the rise in the retirement age and the 2018 tax cuts. The Socialists also want to slow down the speed of budget balancing, targeting an EU-mandated deficit of 3% by 2032 instead of 2029. A pact with the National Rally—who, politically, benefits from instability more than governing—is unlikely, but not impossible, especially since a bargain with the far right would deliver a majority at 57% of seats.
If Lecornu fails to make friends with another bloc, his days as prime minister will likely be short in number, compelling Macron to appoint a prime minister from an opposition party, call snap elections, or resign outright. The inability to pass a budget would worsen France’s fiscal outlook further, and if one is passed, it is only the first step in a disciplined saga of austerity measures. France’s fiscal troubles are not yet at the level of a Greek-style meltdown, and the risk of contagion is limited. More realistically, France faces downside risks in its inability to reignite growth, which will continue to lag Germany and southern and eastern Europe. Attracting FDI and manufacturing capacity will likely also suffer. This all risks France’s leadership at the EU level, likely reinforcing the EU’s institutional inertia, which has prevented the adoption of Mario Draghi’s competitiveness reforms recommended a year ago. France’s fiscal reckoning may extend to the rest of the EU; the fiscal responses to COVID-19 have spiked the EU’s aggregate debt to 81.7% of GDP in 2023, far above the EU’s goal.
