France Faces High Public Debt and Sets Deficit Reduction Targets for 2025
France's public debt reaches 114% of GDP; government sets deficit reduction targets for 2025 and beyond.
Key Points
- • France's public debt at 114% of GDP, second highest in Eurozone
- • Projected public deficit aims for 5.4% of GDP in 2025
- • Government plans additional €5 billion in savings
- • Italy has a declining debt trend, praised by the IMF for fiscal health
As of the first quarter of 2025, France's public debt has surged to 114% of its GDP, marking a stark contrast to its neighbors in the Eurozone, and positioning it as one of the worst performers in terms of public finances. Only Greece, with a staggering 153.6%, and Italy, which has 135.3% debt relative to its GDP, surpass France's debt levels. In light of this situation, the French government has announced ambitious deficit reduction plans, aiming to lower the public deficit from the current 5.8% of GDP to 5.4% by 2025, with a longer-term goal of achieving below 3% by 2029.
To support this initiative, the government intends to implement an additional €5 billion in savings on top of the €5 billion previously announced. These savings are expected to come from €3 billion in unspent state credits and €1.7 billion in cuts to health insurance expenses. Economic Minister Eric Lombard underscored the importance of fiscal discipline, stating, "The respect for the public deficit target remains achievable, but it requires an additional effort on spending," emphasizing the dual objectives of restoring public finances and enhancing economic sovereignty.
Contrasting with France's trajectory, Italy has shown promising results, achieving a budget surplus by the end of 2024 and decreasing its debt percentage significantly from 145.7% in 2021. This improvement has been acknowledged by the International Monetary Fund (IMF), which praised Italy's fiscal performance and projected that it could aim for a 3% budget surplus by 2027. Meanwhile, France's high public deficit forecast remains a critical concern, with projections estimating it will still hover around 5.6% in 2025 despite the efforts being made.
The backdrop of this issue includes uncertainties regarding global economic conditions, particularly stemming from US trade policies. These factors have compelled the French government to adjust its economic growth forecast for 2025 down to 0.7%. Therefore, the focus remains on fiscal discipline as France navigates its complex economic landscape while attempting to reassess its fiscal position in compliance with European standards.