France Faces Fiscal Peril: Budget Deficit in Focus

France's fiscal health is under scrutiny as its budget deficit risks exceeding 5% by 2026, a situation Bank of France Governor warns could push the nation into a danger zone with international lenders. Political stalemate and economic resilience underscore the ongoing budgetary challenges.

France risks entering a critical fiscal situation if its budget deficit exceeds 5% in 2026, warned Francois Villeroy de Galhau, the Bank of France Governor and a European Central Bank policymaker.

Speaking on BFMTV, Villeroy cautioned that surpassing this threshold would signal a 'danger zone' for international lenders. Despite political uncertainties affecting growth projections, France's economy remains resilient, with a forecasted growth of 0.9% in 2025, according to the latest business sentiment survey.

Due to parliamentary gridlock, lawmakers failed to pass a 2026 budget last year, necessitating emergency legislation. Current debates suggest the French government may need to invoke special constitutional powers to ensure budget approval.

(With inputs from agencies.)