France risks a deficit of up to 6.6% of GDP in 2025 without a new budget. This figure doubles the European Union’s 3% limit. Refinancing costs for France’s massive debt continue to grow, adding pressure to the nation’s fiscal situation.

President Emmanuel Macron must now appoint a new prime minister to form a government. However, chances of passing a budget before year-end remain slim. Without a budget by December 20, the government may extend the 2024 budget into 2025. Barclays Bank estimates this would result in a deficit between 6.3% and 6.6% of GDP, up from 6.1% in 2024.

Barclays forecasts a smaller deficit of 5.8% if a 2025 budget passes early next year. This figure includes reduced fiscal growth projections compared to former Prime Minister Michel Barnier’s estimates.

Legal Safeguards Prevent Shutdown

France’s legal system ensures government functions will not halt. A special law may be introduced by December 19 to maintain tax collection and fund commitments.

Social security benefits would continue, although borrowing ceilings for financing might require ad-hoc legislation. Local governments, governed by Article 72 of the constitution, remain autonomous and unaffected by the lack of a national budget.

Barclays anticipates modest economic growth of 0.7% in 2025, lower than the government’s projection of 1.1%. Even with a new budget, a significant deficit reduction appears unlikely, with the deficit forecasted to remain above the 5% government target.