French draft budget caps spending growth to satisfy EU despite rising debt burden

France's proposed 2027 budget plan will comply with the European Union's fiscal advice while the national debt exceeds 120% of the country's economic output, according to the French Budget Ministry. The draft budget anticipates a 0.7% rise in net primary spending, remaining under the EU's 1.2% limit. The goal is to reduce total spending as a percentage of economic output to 56.9% in 2027, from 57.1% in 2026, while tax revenues are expected to be 44.2% of the same measure.

The debt-to-GDP ratio is forecast to climb to 121.7% in 2027, up from 119.3% this year and 115.7% in 2025. Persistent fiscal issues and political instability have adversely affected France's sovereign debt in recent months, with its 10-year government bond yield exceeding 4.5%, and the yield spread over German bonds widening to its highest level in over a decade due to concerns over Paris's ability to curb spending without a stable government majority.

The Finance Ministry aims to submit the final budget bill to lawmakers by the end of September, as Prime Minister Sébastien Lecornu plans to propose €54 billion in spending cuts to bring the deficit in line with the 5% target for 2027, despite facing a challenge in gaining parliamentary approval. Opposition lawmakers have shown reluctance to support austerity measures leading up to upcoming presidential elections.