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France's woes not yet ringing alarm bells across EU but worries keep rising

Europe • Oct 8, 2025, 4:31 AM
5 min de lecture
1

France's political and economic woes are not yet ringing alarm bells across the EU, but concerns are rising that a prolonged crisis could impact the eurozone's growth prospects and negotiations for the bloc's €2 trillion long-term budget.

The French government of Prime Minister Sébastien Lecornu has been in caretaker mode since Monday morning after it spectacularly collapsed less than 24 hours after its ministers were announced.

At the heart of the crisis are disagreements in the hung parliament over how to bring the country's strained finances into order.

The political deadlock — Macron burned through his fifth prime minister since the start of his second mandate in May 2022 — is already impacting the country's economy with the latest twist pushing stocks down and bond yields up.

This comes just three weeks after Fitch, a credit rating company, downgraded the country to A+ over doubts about its ability to bring its budget deficit, currently at around 5.4% of GDP, in line with the 3% of GDP mandated by EU rules.

Moody's and Standard & Poor's are due to update their own ratings in the coming weeks.

Similar downgrades "would then probably translate into further yield increases and spread increases", Philipp Lausberg, a senior policy analyst at the European Policy Centre, told Euronews.

"And of course, all of that is bad for growth too, and being the second largest economy in the EU and in the eurozone, this has repercussions not only for France, but for the rest of the EU too," he added.

'The sooner the better'

Still, he cautioned, "it's too early" yet for repercussions to spill across borders, notably because the French economy "is still considered quite robust". Robust enough that should the political situation stabilise quickly, the impact on the rest of the eurozone will be negligible, Lausberg said.

This analysis appears to be shared by a senior EU official who, speaking on condition of anonymity, said that the muted market reactions so far are a "positive testament to our reputation".

"My expectation of the relatively benign market reaction is that the markets still trust that once all the political complications are dealt with and the dust settles, there will be a French government that is stable and can sort of resume normal policy making, which is of course something we all hope will happen, the sooner the better."

"But of course, saying that there are no financial stability risks, that things couldn't take a turn to the worse, obviously, fiscal stability is a very important part of economic and thereby currency stability. So we take it very seriously," the official added.

Other European officials Euronews has spoken to, also speaking on condition of anonymity, stress that there is no sense of alarm among the countries making up the Eurogroup, whose ministers will meet on Thursday.

But concerns are rising that France, which has the bloc's second-largest economy, could be unable to roll out, and help shape, the necessary reforms the bloc needs to remain competitive in the midst of a turbulent geopolitical landscape and increasing competition from Washington and Beijing.

EU budget repercussions

This also applies to the EU's next seven-year budget, which will run from 2027, and for which negotiations have started following the release of a €2 trillion proposal by the Commission over the summer.

The multi-annual financial framework (MFF), billed as the "most ambitious ever", would see some traditional envelopes like cohesion and agricultural funds trimmed or reworked to the benefit of new programmes targeting new priorities like defence and competitiveness.

However, member states have made clear they will not be able to raise their own contributions to the budget.

MFF negotiations are notoriously arduous, and officials say politicking is important, as is staying on top of complicated and fast-evolving files. The fear is that France's ministerial turnover could, should the crisis last, make that difficult.

"It's of course harder if you have a domestic political situation like that to really commit, to have a strong commitment in the negotiations, but also to have more of a bold stance," the EPC's Lausberg told Euronews.

 "I think it can just slow down the negotiations as well so that we won't see anything substantial in the next few months" and "certainty is something that is extremely important, of course, for economic actors so that could be an issue," he also said.

Macron has tapped Lecornu to try to salvage the situation by Wednesday evening and lead negotiations that could define a "platform of action and stability" for a new government. 

But calls are growing for Macron to step down. These originally emanated from the far-right and far-left but have now reached the centre with former Prime Minister Edouard Philippe adding to the chorus.

The beleaguered French leader has for now cast doubt over what his next move could be, saying only that he will "take his responsibilities" should Lecornu's last-ditch talks fail.


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