Suspension of French Pension Reform Triggers Significant Economic and Budgetary Concerns
The halt of France’s pension reform leads to higher deficits, unemployment, and slow growth, prompting calls for fiscal discipline from European and national economic experts.
- • European Commissioner Valdis Dombrovskis warns suspension will significantly raise France's budget deficit and costs 400 million euros in 2026 and 1.8 billion euros in 2027.
- • France's public deficit projected at 5.4% GDP in 2025 and expected to reduce to 3% only by 2029 as per Maastricht criteria.
- • OFCE forecasts unemployment rising from 7.5% to 8.2% by end of 2026, with loss of 160,000 jobs and household purchasing power declining.
- • GDP growth forecast to remain weak at 0.7% for 2025 and 2026, with public debt increasing to 117.6% of GDP in 2026.
Key details
The suspension of France's pension reform has prompted serious warnings about its budgetary and economic impact, with the country facing increased public deficits, rising unemployment, and slower economic growth.
Valdis Dombrovskis, the European Commissioner for Economy, emphasized in Washington that the halt in the reform will have significant budgetary implications. France, currently grappling with the worst public deficit in the Eurozone, is projected to see its deficit at 5.4% of GDP in 2025, expected to reduce only to 4.7% in 2026 and eventually meet the 3% Maastricht criteria by 2029. The suspension will cost 400 million euros in 2026 and 1.8 billion euros in 2027, costs which must be offset by savings. Dombrovskis stressed the necessity for France to maintain fiscal discipline amidst these challenges.
Adding to the concerns, the French Economic Observatory (OFCE) presented a more pessimistic outlook than the government. It forecasts the unemployment rate rising from 7.5% in mid-2025 to 8.2% by the end of 2026, which would mean approximately 160,000 job losses. Public debt is also anticipated to increase from 113.2% of GDP in 2024 to 117.6% in 2026, while GDP growth is expected to remain subdued at 0.7% in both 2025 and 2026, falling short of the potential growth rate of 1.4%. Household purchasing power may decline by 0.4% in 2026 despite a prior dip in inflation. Nonetheless, the OFCE highlighted resilience via historically high household savings, although this rate is forecast to decline gradually by the end of 2026.
French Prime Minister Sébastien Lecornu has defended the suspension as necessary to restore confidence for fresh solutions, but acknowledges the substantial fiscal cost. This development strains France’s budget during an already difficult economic period marked by political uncertainty and growing economic pressures.
Overall, experts warn that the suspension of pension reforms complicates France’s fiscal outlook, requiring stringent budgetary measures to meet commitments and avoid deeper economic fragility in the coming years.