France Faces Economic Slowdown with Rising Debt Threat

France is confronting a troubling economic forecast as new data highlights both slowing growth and escalating national debt. The International Monetary Fund (IMF) projects the French economy to grow by only 0.4% in 2026, marking a notable decline from the 0.9% predicted for 2025. This sharp slowdown underscores mounting challenges ahead.

Simultaneously, debt concerns are intensifying. France currently holds the position of the third most indebted European Union country, with debt at 118% of GDP for the first quarter of 2026—behind Italy and Greece by margins of 21 and 26 percentage points respectively. However, projections indicate that if current trends persist, France could surpass both to become the most indebted EU nation by the 2030s. Estimates suggest France might overtake Greece by 2028 or 2029 and Italy sometime between 2033 and 2040.

These projections rest on six economic scenarios assuming a status quo, without factoring in new budget measures or economic shifts. The ongoing debates in the National Assembly on the 2027 finance bill, which began on October 13, are particularly significant given the impending 2027 presidential election.

Market signals reflect these concerns; the spread between French government bonds (OATs) and German Bunds surged to 140 basis points in early October, a 60% increase from the previous year and nearing historical highs seen in 2011. Despite this, Nobel laureate Paul Krugman noted that the market-implied probability of a French sovereign default within five years remains low at 1.2%, indicating investor confidence in eventual stability.

Economic analyst Shahin Vallée recently warned that France has entered a "historical danger zone" regarding its debt. Alongside France, other EU countries like Poland, Romania, and Slovakia face rising debt-to-GDP ratios over the next decades.

As France grapples with these intertwined issues of sluggish growth and mounting debt, the outcomes of the finance bill debates and future fiscal policies will be pivotal in shaping its economic future.