Budget Impasse in France
On Friday, a joint committee of French legislators could not agree on the state budget for 2026, according to parliamentary sources. This means France will not have a new budget in place by the end of the year.
As a result, the 2025 budget is expected to be extended into the new year while discussions continue in both the Senate and the National Assembly.
Prime Minister Sebastien Lecornu stated on X, "Parliament will therefore be unable to vote on a budget for France before the end of the year," following the failure of senators and lower house members to find common ground.
Political Challenges and Economic Pressures
France, as the eurozone's second-largest economy, faces significant pressure to control its deficit and rising debt. However, these efforts are being hindered by ongoing political gridlock.
Lecornu, who was appointed in September and reaffirmed in October after his predecessors were ousted over austerity measures, had committed to passing a budget by year-end without resorting to constitutional powers to bypass parliamentary approval.
In a partial victory for the government, lawmakers narrowly approved the social security budget on Tuesday, delaying an unpopular pensions reform until 2028. Yet, the broader state budget remains stalled due to disagreements between the right-leaning Senate, which advocates for spending cuts, and the divided lower house, where left-wing parties are pushing for increased tax revenue.
Proposed Temporary Solution
Lecornu announced plans to convene "the main political leaders to consult them on the way forward" starting Monday. His team indicated that the government will seek to enact a "special law" to temporarily carry over the 2025 budget into 2026, allowing the state to continue tax collection and pay civil servant salaries after January 1.
However, central bank governor Francois Villeroy de Galhau cautioned on Friday that this approach is only a short-term fix. He warned on France Inter radio that extending the 2025 budget could lead to a "deficit far higher than desired."
This budget delay echoes similar challenges from the previous year, when France's 2025 budget was only approved in February after then-prime minister Francois Bayrou pushed it through the lower house. The current political crisis stems from President Emmanuel Macron's snap elections last year, which resulted in a hung parliament and strengthened far-right representation, further complicating legislative processes.
