French Government Faces Budget Adoption Deadlock as Parliament Weighs Special Budget Law

The French government is grappling with challenges to pass the 2026 state budget amid parliamentary deadlock and political pressures. On Monday evening, a special budget bill was presented during the Council of Ministers, with the government aiming for its adoption by Parliament on Tuesday to temporarily finance the state and its administrations following a failed joint parliamentary commission.

President Emmanuel Macron has stressed the urgent need for a budget aligned with the government's goal of a 5% deficit. Despite this urgency, Prime Minister Sébastien Lecornu has reiterated his rejection of invoking Article 49.3 procedural powers to force budget approval, asserting that the budget can still pass without government intervention. However, sources indicate that the Élysée is growing impatient with the prolonged budget process.

If the 2026 budget fails to be adopted, the state would operate under a special law limiting credit to 2025 levels, allowing civil servants' salaries to be paid but potentially unable to cover rising payroll costs due to seniority, hindering job creation within public services. Operational expenses would continue, but new subsidies such as MaPrimeRénov' and emergency agricultural aid would not be granted, possibly dampening economic growth predicted at 1% by the Banque de France. Additionally, tax relief measures like indexing the first income tax bracket to inflation might be nullified, resulting in around 200,000 more households becoming taxable. Social benefits would remain unchanged though new assistance would be stalled.

The budget impasse poses an uncertain impact on the fiscal deficit, with some analysts forecasting an increase to 5.5% of GDP and others anticipating higher tax revenues due to missing indexation. Overall, while not catastrophic, the absence of a 2026 budget would send negative signals to lenders amid already rising borrowing costs, complicating France's economic outlook.

This tense scenario underscores the government's delicate balance as it pushes to conclude negotiations and adopt the budget while navigating parliamentary opposition and procedural constraints.