Banque de France Governor Emmanuel Moulin says France can cut its deficit to 3% of GDP by 2029. Political uncertainty, rising debt-service costs and the need for an approved 2027 budget make credibility the immediate test.
France can reduce its budget deficit to 3% of gross domestic product by 2029, according to Banque de France Governor Emmanuel Moulin. Markets, however, need a nearer-term proof point: a budget that is approved and keeps the deficit on a declining path.
France recorded a deficit of 5.1% of GDP last year and is subject to the European Union's excessive-deficit procedure. Moulin told CNBC that a 5% deficit in the next budget would help reassure investors. He has made the same 2029 objective in Banque de France interviews, arguing that reaching roughly 3% is necessary to stabilize the debt burden.
The arithmetic becomes harder as financing costs rise. Moulin said debt-service expense is increasing by about €10 billion a year. Banque de France has also warned that interest costs could reach €100 billion by 2029 if the trajectory does not improve. Higher yields therefore do more than signal market concern: they consume budget capacity that could otherwise fund services or investment.
Political execution is the variable
France is negotiating the budget amid protests and political fragmentation. That means a credible target requires measures that can survive parliament and remain in force. Temporary revenue increases may improve one year without changing the spending path, while aggressive cuts could weaken growth and make the denominator less favorable.
For bond investors, the immediate questions are whether the budget is adopted, whether the deficit target has identifiable measures and how French borrowing costs trade relative to German debt. A wider spread raises the cost of refinancing and can feed back into the fiscal outlook.
Moulin's message is plausible but conditional. France has reduced deficits before, and the 2029 target is not mathematically impossible. The next three months will show whether the government can convert that objective into an enforceable budget rather than another distant promise.
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