Executive Summary
- Valdis Dombrovskis stated that France appears to be on track to reduce its budget deficit for 2025.
- Despite the fiscal cost of suspending pension reform, the French government is expected to introduce other compensatory measures to meet its EU fiscal consolidation commitments.
- France’s 2026 budget must align with its medium-term fiscal structural plan to ensure long-term debt sustainability and financial stability.
The Story So Far
- France is actively working to reduce its significant budget deficit to comply with European Union fiscal consolidation agreements, which require member states to manage their public finances responsibly. Despite the fiscal cost incurred by suspending its pension reform, the French government has committed to implementing other measures to offset this impact, leading the European Economic Commissioner to believe France is on track to meet its 2025 deficit targets.
Why This Matters
- France’s commitment to introduce compensatory measures to offset the fiscal cost of suspending pension reform, coupled with the European Economic Commissioner’s positive assessment of its 2025 budget deficit reduction, signals its adherence to EU fiscal consolidation targets, potentially bolstering investor confidence and overall Eurozone stability. This trajectory also highlights the EU’s ongoing emphasis on long-term debt sustainability, influencing France’s future budgetary decisions.
Who Thinks What?
- Valdis Dombrovskis, the European Economic Commissioner, believes France appears to be on track with its 2025 budget deficit reduction efforts, provided it introduces compensatory measures for the suspended pension reform and ensures its 2026 budget aligns with its medium-term fiscal plan.
- The French government has committed to implementing measures to offset the fiscal impact of suspending the pension reform and anticipates achieving a budget deficit of 5.4% of GDP in 2025.
Valdis Dombrovskis, the European Economic Commissioner, announced on Thursday that France appears to be on track with its efforts to reduce its budget deficit for 2025. Speaking in Washington during the International Monetary Fund meetings, Mr. Dombrovskis indicated that while the suspension of France’s pension reform carries a substantial fiscal cost, the French government is expected to introduce other measures to compensate, ensuring adherence to its agreed fiscal consolidation with the European Union.
France’s Fiscal Outlook
Mr. Dombrovskis, who also serves as the European Executive Vice President of the European Commission for An Economy that Works for People, acknowledged the French government’s decision to suspend the pension reform. He noted that Paris has committed to providing measures that will offset the negative fiscal impact of this decision.
Regarding the upcoming fiscal year, the Commissioner emphasized the importance of France’s 2026 budget aligning with its medium-term fiscal structural plan. This alignment is crucial for ensuring France’s long-term debt sustainability and financial stability, according to the EU official.
France anticipates a budget deficit of 5.4% of GDP in 2025, a reduction from 5.8% in 2024. Dombrovskis also offered a positive assessment for the current year, suggesting that France may ultimately meet its fiscal targets for 2025, despite earlier expectations of potential deviations.
