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Investing.com - France’s budget deficit is expected to remain above 5% in 2026, according to a new report from UBS, as the country faces mounting fiscal pressures despite ongoing budget negotiations.
The analysis comes as Prime Minister Gabriel Lecornu had been targeting €41 billion in savings or additional revenues for 2026, while the Socialist Party proposed a more modest fiscal effort of €22 billion. UBS predicts the final budget will likely fall between these figures, with expected savings of €22-25 billion.
Several factors threaten to widen France’s budget deficit in 2026, including higher interest payments, increased contributions to the European Union, and greater defense spending. The report notes that overall expenditures are set to rise while revenues are expected to grow more slowly than nominal GDP.
France’s debt-to-GDP ratio, already at 113% in 2024, is projected to deteriorate by an additional 2-3 percentage points annually over the medium term, according to UBS. This persistent fiscal pressure comes amid ongoing political uncertainty in the country.
UBS maintains a "Deteriorating" outlook for France’s credit rating and advises investors to avoid long-dated French government bonds, citing both fiscal and political headwinds that continue to challenge the country’s financial stability.
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