France: Presidential Elections Increase Difficulty of Fiscal Cleanup
- General government deficit set to be 5.4% of GDP this year, with return to 5.0% delayed by a year until 2027, according to draft 2027 budget
- To achieve its 2027 deficit target, the government has presented a fiscal consolidation package totalling around €54bn, relying primarily on spending restraint
- The government's lack of an absolute majority in the National Assembly could necessitate concessions to opposition parties to secure the budget’s adoption
- Country gearing up for presidential elections in April and May 2027, with recent opinion polls placing Marine Le Pen well ahead of her potential rivals
- A rise in French sovereign bond yields has raised questions about the potential role of the ECB in containing market tensions
- Reforming the pension system, a key challenge for the country’s long-term sovereign debt sustainability
