European economies are all over the place. While some are reducing government spending and exiting recessions, others are slowly moving the opposite direction.
France’s economy is not a story of optimism.
Growth targets are quietly slipping away, debt is stacking higher, and outside risks are starting to feel less like threats and more like realities.
Business confidence is slipping, and the government’s plans to rein in debt now look harder to achieve.
Why is growth slowing down?
The government now expects France’s economy to grow by just 0.7% this year, trimmed from the original 0.9% figure that shaped the 2025 budget.
The Bank of France revised its forecast down to 0.7% back in March, while the French Economic Observatory (OFCE) sees only 0.5%.
The first signs of trouble were already visible early in the year, with the Bank of France’s business survey pointing to a GDP rise of only 0.1% to 0.2% in the first quarter.
Source: Bloomberg
Behind the numbers, the story is simple. Business leaders across the board are reporting higher uncertainty, with construction and industry hit hardest.
Construction firms are paralyzed by doubts over new tax policies and delayed public projects, while industrial companies are rattled by geopolitical tensions and unpredictable trade conditions.
Confidence is eroding at the exact moment the economy needed private sector energy to take over.
Without a pickup in private investment, France’s economy risks getting caught in a feedback loop: uncertainty slows activity, slower activity fuels more uncertainty, and the momentum needed to stabilize public finances drifts further out of reach.
Can France afford its debt promises?
You can’t hide the numbers. France’s public debt currently stands at €3.3 trillion.
That is equal to 113% of GDP according to INSEE. That figure alone explains much of the pressure behind the government’s €5 billion spending cut announced earlier this month.
Officially, the goal remains to shrink the deficit from 5.8% in 2024 to 5.4% this year and eventually meet the EU’s 3% rule by 2029.
But the strategy is built on increasingly shaky ground. Savings are supposed to come from cancelling or postponing expenditures rather than actual, structural reforms.
Part of the €5 billion is already earmarked for defence, as France doubles down on its support for Ukraine and national security.
Meanwhile, ratings agencies are watching closely as France struggles to control its debt levels.
Moody’s still rates France’s debt at Aa3 with a stable outlook, but both S&P and Fitch have negative outlooks on their AA- ratings.
A downgrade would add another cost France can barely afford. That would mean higher borrowing rates in a market already demanding more from indebted governments.
How the US is tightening the squeeze
One of the biggest external shocks comes from across the Atlantic.
President Donald Trump’s decision to impose a 20% tariff on all European Union imports in early April shook markets and complicated France’s economic outlook.
The French government has warned that a full-blown trade war could lead to lower tax revenues and further reduce the country’s GDP growth.
Minister Lombard made clear that Paris would not respond with new taxes or additional spending cuts if the situation worsens. Instead, it will accept the temporary widening of the deficit.
Even after Trump announced a three-month pause on tariffs for countries outside China, French officials are not getting comfortable.
They have described Trump’s trade policy as unpredictable.
A prolonged trade conflict would hit exports and weigh further on growth, making it harder for France’s economy to meet its already downgraded targets.
The relationship between the US and France is clearly deteriorating.
President Emmanuel Macron has openly opposed Trump and his recent comments against Ukraine, while Trump himself openly endorses the current French President’s opponent, Marine Le Pen.
How is political instability affecting business?
Political instability at home is magnifying the damage. Prime Minister François Bayrou’s minority government barely survived a no-confidence vote to pass the 2025 budget.
Businesses are slowing as they deal with rising taxes and an unpredictable regulatory environment.
Patrick Martin, head of the Medef business federation, has warned that France is moving against the global current by raising costs just as others are trying to stimulate investment and growth.
January’s economic data looked slightly better than feared, but February brought confirmation that activity is softening again, especially in services and construction.
For businesses, it is not just about taxes or growth forecasts. It is about the lack of a clear path forward. Investors hate nothing more than political fog, and in France right now, visibility is poor.
Investment always follows business sentiment. And uncertainty is the biggest enemy of investment.
France’s real story
Perhaps France’s economy is not on the verge of crisis, yet.
But the country is certainly facing something more dangerous. A slow decay of resilience.
Growth is being eroded one revision at a time. Fiscal space is narrowing, and political capital is being spent without renewal.
This does not mean an imminent recession or a financial meltdown.
But it does mean that unless growth drivers are found, either through innovation, investment, or genuine reform, France will enter the next downturn weaker and more exposed.
Public finances are going off the grid, and without addressing this deeper imbalance, even external relief will only offer temporary breathing room for Europe’s second biggest economy.
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