France

France's public finances remain among the weakest in the Eurozone, having deteriorated significantly since the Covid-19 pandemic. Successive governments have struggled to reduce large budget deficits, reflecting structurally high public expenditure, particularly on social protection and healthcare, together with unfunded tax cuts in previous governments. Persistent political fragmentation since the 2024 legislative elections has further complicated fiscal consolidation. Lacking a stable parliamentary majority, successive governments have relied on fragile compromises to pass budgets, reducing the credibility of medium-term fiscal adjustment plans. The presidential and legislative elections in 2027 are likely to be pivotal in determining whether France can restore a more sustainable fiscal trajectory.

France's external position has stabilized. The current account has returned close to balance, supported by resilient services exports, helping stabilize the country's net international investment position. Nevertheless, France continues to rely heavily on foreign investors to finance both its public debt and external liabilities. Sustained progress in reducing fiscal deficits will therefore remain important to preserve investor confidence and limit financing risks.

France scores relatively poorly compared to peer countries in terms of economic freedom. High government spending (crowding out private business) and high taxation are weighing on the country’s performance. Nevertheless, this is partially compensated by strong scores on property rights enforcement, judicial effectiveness and business freedom. France also scores relatively well on regulatory quality, rule of law, and control of corruption, helping to sustain a good business environment overall. On sustainability, France is ranked only 61st in our index, because of a relatively low share of renewable electricity output, but its CO2 emissions are low thanks to nuclear energy. 

The 2024 legislative elections marked a turning point in French politics, ending the long period during which governments generally benefited from stable parliamentary majorities under the Fifth Republic. Persistent political fragmentation has constrained policymaking, making it more difficult to implement structural reforms and credible fiscal consolidation. While the current institutional framework continues to provide political stability, legislative gridlock is likely to persist until the 2027 presidential and legislative elections. These elections will represent a key inflection point for economic policy, with the potential for significant changes in fiscal, labor market and industrial policies depending on the composition of the next government.