France braces for record debt burden approaching 120% of GDP by 2026

France is preparing for a significant increase in its debt burden, with the finance ministry projecting debt levels will approach 120 percent of GDP in 2026, marking a record high for the eurozone's second-largest economy.

The ministry outlined its fiscal projections this week, indicating the government expects to end 2026 with a budget deficit of 5.4 percent. Prime Minister Sebastien Lecornu expressed optimism regarding deficit reduction, stating he expects the 2026 deficit to remain below 5.5 percent, suggesting some confidence in France's fiscal trajectory despite the mounting debt forecast.

The projections underscore the fiscal pressures facing France as it navigates post-pandemic economic recovery while managing long-term structural challenges. Rising debt levels relative to GDP typically increase a government's borrowing costs and can constrain future policy flexibility, though eurozone members benefit from the stability provided by the European Central Bank's monetary framework.

These figures will be closely watched by European Union and International Monetary Fund officials as France works to balance growth objectives with fiscal consolidation targets set under EU fiscal rules, which have been reformed following the pandemic-era suspension of deficit limits.