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France is locking in a 4.8% deficit ceiling for 2026, as the government scrambles to hold its fiscal credibility together and avoid choking under its own debt. Francois Villeroy de Galhau, Governor of the Bank of France, told lawmakers that capping the budget shortfall at that level is the only way to stay on track toward a 3% deficit target by 2029. “It is absolutely necessary to get within 3% between now and 2029 and this means a maximum deficit of 4.8% next year to cover a quarter of the path,” Villeroy said in an interview with La Croix, warning that anything more risks pushing France into “gradual suffocation.” The National Assembly is still grinding through the 2026 draft budget. It currently sets a deficit of 4.7%. But Prime Minister Sebastien Lecornu, whose survival depends on opposition support, has publicly floated flexibility. He says the real aim is to stay “within 5%,” if that’s what it takes to avoid another political bloodbath. “It is no longer possible to govern by the discipline of one camp alone,” Lecornu told lawmakers, “but by the cultivation of a rigorous debate between lawmakers who start with different beliefs.” Credit outlook slashed as Macron’s pension freeze fuels backlash Moody’s Ratings didn’t waste time reacting. The agency slashed France’s credit outlook from stable to negative, citing political gridlock and legislative chaos. “The decision to change the outlook to negative reflects the increased risk that the fragmentation of the country’s political landscape will continue to impair the functioning of France’s legislative institutions,” it said Friday. France still holds a Aa3 rating, seven levels above junk, on par with the UK and Czech Republic. But that gap is shrinking fast. This downgrade followed earlier hits from S&P, Fitch, and DBRS, as investors began questioning how long France could…

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Filed under: News - @ October 25, 2025 11:28 am