French Prime Minister Sebastien Lecornu presented the draft budget for next year on Thursday, outlining 54 billion euros in cost-cutting measures designed to reduce the fiscal deficit to 5% of GDP by 2027 while keeping this year's shortfall within 5.5%. The move sets the stage for a confrontation between the minority government and parliament, potentially triggering the collapse of the administration. Lecornu described the budget proposal as a bold public spending reduction initiative for a country overly reliant on government expenditure, while acknowledging the political risks involved.

Under the plan, France will primarily slash pension spending and administrative costs across government ministries, with the exception of defense outlays. The government's deficit reduction efforts this year have been hampered by weaker-than-expected economic growth and rising interest costs. By the end of 2025, France's deficit stood at 5.1% of GDP, deepening the fiscal shortfall further.

With the presidential election approaching in April, turbulence in global bond markets has intensified, putting Lecornu under pressure to improve France's public finances. Interest payments on government debt are expected to reach 65 billion euros this year, a 25% increase from 2025 and surpassing either the education or defense budgets. Lecornu projects that borrowing costs could rise by an additional 10 billion euros next year.

The yield spread between French and German 10-year bonds has widened to 96 basis points, the highest level since the eurozone debt crisis of 2012. Meanwhile, France's economy remains stagnant, with the government anticipating GDP growth of just 0.5% this year—half of the initially forecast figure.

Growing voter dissatisfaction over the cost of living has made any reduction in welfare benefits or tax increases deeply unpopular. Recently, fishermen blockaded the port of Nice to protest rising energy prices, raising concerns that the "Yellow Vest" movement could make a comeback.

Lecornu stated that the draft budget will achieve 6 billion euros in savings from the pension system, through measures such as freezing benefit increases or cutting tax breaks for retirees. These steps are certain to provoke opposition parties. Far-right leader Marine Le Pen has labeled both measures unacceptable, and the votes of her National Rally lawmakers could determine whether the government falls in a no-confidence motion over the budget. Left-wing parties have already signaled they would back a no-confidence vote if the administration proceeds with cuts affecting pensioners.

Lecornu urged lawmakers to act responsibly, asserting that "no one can evade reality for long... the public interest demands that France have a budget," a responsibility that applies to both political parties and presidential candidates. He also confirmed that the surtax on large corporations introduced in 2025, originally pledged as a one-year measure, will be extended, though its impact will be softened. The levy, initially paid by companies generating over 1 billion euros in annual revenue in France, brought 8 billion euros to the government last year and is expected to yield 5 billion euros under the new budget framework.