France's Political Instability in 2024 Drags Economy Down by €15 Billion Amid Investment Freeze
France's 2024 political turmoil has led to a projected 0.5% growth loss and €15 billion economic cost as investment freezes and market anxiety rise.
- • France’s ongoing political instability since June 2024 is causing economic stagnation.
- • OFCE estimates political crisis will reduce growth by 0.5 points, costing roughly €15 billion by end of 2025.
- • Rising bond interest rates surpass 3.5%, increasing public debt costs and straining credit availability.
- • Households reduce spending and businesses delay investments amid uncertainty.
- • Experts call for clear fiscal policies to restore investor confidence and economic stability.
Key details
France has been grappling with significant political instability nearly a year after the unexpected dissolution of the National Assembly in June 2024. The resignation of Minister Sébastien Lecornu on October 6, 2024, has further deepened government uncertainty, which is now taking a tangible toll on the economy.
According to the Observatoire Français des Conjonctures Économiques (OFCE), the ongoing political crisis is projected to reduce France's economic growth by 0.5 percentage points by the end of 2025 — translating to a loss of approximately €15 billion. This forecast reflects the cautious behavior of households and businesses amid uncertain political conditions; families are cutting back on spending while companies delay investments to avoid risks, compounding economic stagnation.
The financial markets are also signaling stress. Economist Lucile Bembaron of Asterès explains that rising interest rates on French government bonds, climbing above 3.5% for the ten-year borrowing rate following Lecornu’s resignation, underscore waning investor confidence. This increase raises public debt service costs and is likely to push banks to hike credit rates, which would further restrict business activities and dampen consumer purchasing power.
Despite these warning signs, analysts caution against panic. Bembaron states this does not indicate an imminent financial crash but serves as a call for prompt political leadership. Senator Patrick Kanner has urged political parties to swiftly restore stability and clarify fiscal policy to reassure investors and stimulate economic recovery.
The political crisis since mid-2024 has left France’s economy frozen and confidence deeply undermined. While foreign investors have not yet withdrawn, their cautious stance underscores the need for a credible and transparent budget plan to foster trust and support growth. The government faces critical decisions to reverse the economic slowdown and mitigate the substantial costs tied to ongoing instability.