France: Upcoming Confidence Vote Raises Further Uncertainty Over Budgetary Outlook

The confidence vote called by France’s Prime Minister François Bayrou for 8 September, ahead of the parliamentary debate around the 2026 Budget, comes amid strong political opposition to the government’s proposed multi-year budget set out in July.

Left-wing political groups, including the Socialist Party, and the far-right Rassemblement National, have said they will vote against the government, The two parties hold a combined 298 seats, above the 289 constituting an absolute majority in the National Assembly.

Highly Fragmented Parliament Raises the Risk of Renewed Political Instability

The government’s collapse, which would be the second in less than a year, is the most likely outcome under the current parliamentary setting. The consequences would be negative for the economy given the choices it would leave President Emmanuel Macron. Either Macron appoints a new prime minister (the fifth in four years) tasked with forming a new government or he calls for another snap legislative election, the second in two years.

Figure 1: France’s 10-year government bond yield increases relative to that of peers (%)

Political Deadlocks Weigh Against Fiscal Consolidation

Appointing a new prime minister who will need to make concessions on the 2026 Budget appears more likely than another dissolution given the risk of deadlock resulting from another hung parliament dominated by far-left or far-right parties. Passing next year’s budget under the current parliament requires watering down the Bayrou government’s savings plan of EUR 44bn or around 1.5% of GDP.

The political impasse undermines the planned reduction of the budget deficit from 5.8% of GDP in 2024 to 5.4% of GDP in 2025 and 4.6% in 2026. Instead, Scope Ratings’ baseline is for France’s budget deficit to decline only to 5.6% of GDP in 2025 and 5.3% 2026.

Scope is also more conservative around the prospects for longer-term fiscal consolidation, due mainly to France’s higher refinancing rates.

Net interest payments are set to rise to about 4% of government revenue in 2025 from 3.6% in 2024, in line with Belgium (3.8%) but still below Spain (5.2%) and the United Kingdom (6.6%). Similarly, France’s 10-year government bond yields have moderately but steadily risen to 3.5% (Figure 1), converging with those of Spain and Italy.

Given these weaker fiscal projections, Scope expects France’s government debt-to-GDP ratio to continue to increase to around 122% by 2030, from 113% in 2024, above the government’s target of 117% in 2029.

While not Scope’s baseline, a favourable outcome of the government winning the confidence motion would represent a significant breakthrough and support near-term budgetary trade-offs. Still, political uncertainties ahead of municipal elections in March 2026 and the presidential elections in April-May 2027 remain key economic challenges.

France’s medium-term fiscal outlook thus remains constrained by a fragmented political landscape, heightened political polarisation and an electoral calendar working against political compromises on economic and budgetary reforms.

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Thomas Gillet is a Director in Sovereign and Public Sector ratings at Scope Ratings. Brian Marly, a senior analyst in sovereign ratings at Scope, contributed to drafting this research.