France's 2026 Budget Clears Final Hurdle, Offering Fragile Truce for Macron's Government

By Michel Rose, Reuters

PARIS, Feb 2 (Reuters) – France's political deadlock over public finances is nearing an end. The country's 2026 budget, stalled for over a month, is expected to pass parliament on Monday after two no-confidence motions are likely defeated. The move grants a crucial, if temporary, respite to Prime Minister Sebastien Lecornu's minority government.

The budget's passage concludes nearly two years of turbulent negotiations that began after President Emmanuel Macron's 2024 snap election resulted in a hung parliament. The political paralysis coincided with mounting pressure to address a significant deficit, creating a perfect storm for policymakers.

The saga has exacted a high price: unseating two prime ministers, rattling debt markets, and straining relations with European partners concerned over France's fiscal trajectory. Lecornu, whose own appointment last October was mired in confusion, ultimately brokered a deal by securing support from Socialist lawmakers through targeted, and costly, concessions.

"He's pulled a rabbit out of a hat, but the magic came at a steep cost," said a senior finance ministry official, speaking on condition of anonymity. "Stability has been purchased, not engineered through reform."

Investors have responded cautiously to the newfound stability. The risk premium on French government bonds over German benchmarks has narrowed to levels last seen before Macron's 2024 election announcement, signaling tempered relief in the markets.

The Socialist party's key concession was the suspension of a deeply unpopular pension reform, pushing the planned increase in the retirement age to 64 until after the 2027 presidential election. This effectively puts major structural reforms on hold for the remainder of Macron's term.

POLITICAL BREATHING ROOM, POLICY PARALYSIS

With just over a year until the next presidential election, the budget truce offers Macron a reprieve. However, it comes as the president, nearing the end of his second term with low approval ratings, has largely lost control of the domestic agenda. His signature supply-side economic reforms are stalled, and meaningful spending cuts appear politically impossible as election campaigning begins in earnest.

Macron's allies argue that Lecornu's flexibility averted more drastic policy reversals, such as the reinstatement of a wealth tax, thereby protecting Macron's legacy of making France more business-friendly. The president has since pivoted his focus almost entirely to foreign policy, advocating for European strategic autonomy and a tougher stance in transatlantic disputes.

Domestically, the political landscape remains fractured. Macron's centrist bloc is weakened and lacks a clear successor as former prime ministers Edouard Philippe and Gabriel Attal position themselves for a presidential run. Lecornu's handling of the budget has also boosted his profile.

The fragmentation of the centre raises a pivotal question for 2027: whether a mainstream candidate can coalesce enough support to reach the runoff election, likely facing a resurgent far-right led by either Jordan Bardella or Marine Le Pen.

REACTIONS & ANALYSIS

Claire Moreau, Political Science Professor at Sciences Po: "This is a classic case of short-term political management overriding long-term economic strategy. The government has bought peace by postponing difficult decisions, effectively kicking the can to the next administration. The fundamental issues of public spending and debt remain unaddressed."

Henri Lefevre, Small Business Owner in Lyon: "Finally, some certainty! The endless debate was worse than any single policy. Now maybe we can have a stable fiscal environment to plan and invest. Lecornu did what was necessary to get the country moving again."

Sophie Renard, Commentator for 'Le Monde': "It's an utter farce. They've surrendered to political blackmail, sacrificed fiscal responsibility for survival, and called it a 'success.' This budget doesn't solve our problems; it just papers over the cracks until after the election. A complete abdication of leadership."

Thomas Klaus, Economist at Eurobank Research: "The market reaction is positive but fragile. The premium compression shows relief that a crisis is averted, but the underlying structural deficits are unchanged. France has avoided a cliff but is still walking a tightrope, with the European Commission's deficit rules looming."

(Reporting by Michel Rose; Editing by Ros Russell)