Graphic: what is included in France's 2027 budget
The French government has released its 2027 budget, seeking €43 billion in savings as the country grapples with a deficit expected to reach 5.4% of GDP in 2026, well above the eurozone's 3% ceiling. Combined with ongoing measures from this year, the budget aims to reduce the deficit by €54 billion, bringing it down to 5.0% of GDP in 2027.
The budget includes significant changes to pension indexation and tax allowances, alongside broader spending reductions. However, passage through parliament remains far from certain, with the government facing a fragmented National Assembly and potential no-confidence challenges.
Fiscal pressure mounts
France's debt-to-GDP ratio reached 119.3% in 2026 and is projected to rise to 121.7% in 2027, more than double the European limit of 60%. Debt servicing costs alone are expected to increase by approximately €10 billion in 2027 compared to 2026, adding to the fiscal pressure driving the budget reforms.
Financial markets have also signaled concern. France's 10-year bond yields reached 4.96% in early October 2026, approaching their highest level since 2002, with the premium over German bonds reaching 130 basis points.
Pension reforms at the centre
Major elements of the budget include proposed changes to pension indexation. Currently, pensions are indexed to inflation annually to preserve purchasing power, with the mechanism calculated based on consumer price indices from INSEE. The 2027 budget proposes under-indexing pensions above €1,260 per month by 0.4 percentage points relative to inflation.
The government also plans to lower the cap on the 10% pension tax allowance from €4,439 to €3,000. Together, these pension measures are expected to save approximately €5.5 billion, with €4.1 billion coming from the indexation changes and approximately €1.4 billion from the tax allowance adjustment.
Parliamentary hurdles ahead
Following snap elections in 2024, France's National Assembly has no stable majority, with the government and its allies holding fewer than 200 of the 577 seats required for a majority. This makes the Socialists, with 69 lawmakers, and Republicans, with 50 lawmakers, potential swing blocs for budget passage.
Debates on both the main and social security budgets are scheduled to begin in the Assemblée nationale on October 13. The texts will then move to the Senate before a final vote in December.
The 2026 budget ultimately passed in late January 2026 after Prime Minister Lecornu used Article 49.3 three times and survived multiple no-confidence votes, following four months of parliamentary debates after the original December 2025 deadline was missed. Two of Lecornu's predecessors, Michel Barnier and François Bayrou, lost their positions while attempting to pass budget plans through parliament, with Barnier becoming the shortest-serving prime minister in the Fifth Republic after using Article 49.3 and facing a no-confidence vote in December 2024.
Under France's Constitution, Article 49.3 allows the government to pass budget legislation without a parliamentary vote, though this exposes it to no-confidence motions. The mechanism can be used as often as needed for budget bills, unlike other legislation where it is limited to once per parliamentary session.
If the budget fails to pass before the deadline, exceptional measures would be required to levy taxes and maintain government operations at the start of 2027, as occurred with the previous budget cycle.
