Macron faces political risks over French fiscal woes

Significance

The government is highly dependent on steady GDP growth to meet its pledges on deficit-reduction and tax cuts. It was forced to implement EUR10bn (USD10.7bn) in emergency cuts in February after it lowered the 2024 GDP growth forecast from 1.4% to 1.0%. Sovereign ratings agencies have voiced concerns over France’s ability to meet fiscal targets.

Impacts

• If the government loses heavily in June’s EU elections, as the polls predicts, it will probably face a censure motion shortly after.
• Stronger-than-expected growth in the first quarter increases the chances that S&P will maintain its rating for France.
• France’s fiscal constraints will make it harder for the government to reverse polling trends and weaken far right support.