France is experiencing a confluence of economic and political pressures that have heightened concerns among international investors. The country’s debt-to-GDP ratio stood at 115.6% in 2025, with a budget deficit projected to reach 5.4% for the current year—figures significantly higher than comparable economies like the UK. French Finance Minister Roland Lescure has committed to reducing the deficit, though specific details on achieving this goal remain unclear.
Student protests have erupted demanding increased government spending on schools and public services, creating tension with the demands of financial markets for fiscal restraint. A survey of French employers revealed that 82% are pessimistic about the incoming government’s economic policies, with two-thirds expressing concern that their businesses could become vulnerable or insolvent if economic policy remains uncertain over the next five years. Business investment has declined amid this uncertainty.
The French situation mirrors broader challenges seen in the UK and US, where pandemic-related spending increases were followed by additional expenditures related to geopolitical events. However, France has been hit particularly hard, with 10-year bond yields recently reaching their highest levels since July 2002, approaching 5%. Japanese investors, traditionally major purchasers of French bonds, have reduced their holdings in search of better returns domestically, exacerbating the pressure on French government finances.
Political complications add another layer of difficulty. President Macron’s attempt to raise the pension age from 62 to 64 stalled at 62 and nine months following parliamentary deadlock after the 2024 snap election. The anticipated presidential runoff next April between Marine Le Pen of the National Rally and Jean-Luc Mélenchon of La France Insoumise has particularly alarmed markets, given their divergent and contradictory economic policy positions. Analysts warn that the collapse of centrist political forces and the potential for extreme political outcomes could have ramifications extending throughout the eurozone and beyond.
Economists and analysts point to the growing disconnect between France’s economic fundamentals and its political trajectory. While France possesses various structural advantages, including relatively low electricity prices and above-average infrastructure, weak economic growth and political gridlock have prevented these strengths from being leveraged effectively. Some experts have raised the prospect of potential eurozone instability should political outcomes further undermine investor confidence in France’s fiscal trajectory.
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