In preparing the 2026 budget, the government must deal with the fragility of the French economy.

Prime Minister François Bayrou has promised that the "major choices" for the next budget will be unveiled before July 14, in order to find €40 billion between the State, Social Security, and local authorities.

Behind the scenes, the major maneuvers have already begun. A marathon of government meetings and wide-ranging consultations are scheduled, initiated during the painful adoption of the 2025 budget, involving parliamentarians, local authorities, employers, and unions.

Economy Minister Eric Lombard told MPs on Tuesday that he and his Public Accounts colleague, Amélie de Montchalin, would meet with all the groups represented in the National Assembly and the Senate "before July 15" to gather their proposals.

Matignon's decisions on the budget will be "informed by dialogue with Parliament," he added.

Beyond the desire to restore the depleted public finances, this method of consultation aims to protect the minority government from further censure.

Even if it means keeping the nature of the measures that will be taken vague: social VAT? Non-indexation of social benefits? Elimination of tax loopholes? None have been decided at this stage, according to the Ministry of Finance.

"Too weak"

"Today, the government's base seems really too weak to push through ambitious reforms that would structurally restore the accounts," Julien Lecumberry, an economist at Crédit Mutuel Arkéa, told AFP.

However, France is backed into a corner. The government is still forecasting a public deficit of 5,4% of GDP in 2025 and 4,6% in 2026, before falling below the European maximum of 3% in 2029.

More pessimistic, the European Commission sees them at 5,6% this year and 5,7% next year, the worst in the Eurozone.

Julien Lecumberry emphasizes that "investors are well aware that the French trajectory is extremely delicate," to the point of making France pay more than Spain or Portugal for its 10-year loans.

As the clock ticks on the budget, the weakness of the French economy complicates this already difficult equation, in a context of European rearmament.

The country's GDP recorded a small increase of 0,1% in the first quarter, and expansion is expected to slow significantly in 2025. After 1,1% last year, the government is forecasting growth of 0,7%, a forecast identical to that of the Bank of France but higher than those of the IMF and the OECD (0,6%).

"Crisis of confidence"

As factors of fragility, the OECD pointed on Tuesday to the increase in American customs duties as well as, in France, "the risk of political turbulence" and budgetary "uncertainties."

This gloom is reflected in indicators such as business climate and household confidence, which darkened in May.

"These data paint a rather negative picture of the French economy," says Charlotte de Montpellier, an economist at ING.

In the industry, faced with competitiveness issues, rising customs duties and slowing global demand, "any recovery in the sector will be moderate at best over the coming months," it said in a note.

And "the deterioration in the outlook for the services sector is worrying; the French economy will not be able to rely on its old engine to gain momentum in the coming months," she adds.

Instead of boosting household consumption, the sharp slowdown in inflation (0,7% year-on-year in May) resulted in increased savings (18,8% of disposable income in the first quarter).

"We have an economy that is indeed beginning to accumulate real weaknesses," but above all, "a serious crisis of confidence" with fears about unemployment and business failures, analyzes Julien Lecumberry.

"The drivers to revive growth are there," he assures, citing household savings and corporate cash flow. But as long as this crisis of confidence persists, "it will be difficult for the French economy to get going again. The question is where this renewed optimism can come from."

Illustrative image of the article via Depositphotos.com.