Investors doubt announced budget deficit reduction
Despite the French government's announcements to reduce the budget deficit, investors remain skeptical, as evidenced by the bond markets' reaction. This distrust persists amid France's strained fiscal situation.
On October 3, 2025, Le Monde reports that investors have little faith in the French government's announced reduction of the public deficit. According to the article, the yield on 10-year government bonds remained high, around 3.2%, signaling a lack of confidence in the proposed measures.
The government promised to cut the deficit from 5.5% of GDP in 2024 to 4.7% in 2025, through budget savings and expected economic growth of 1.5%. However, economists quoted in the article, such as Agnès Bénassy-Quéré, view these projections as overly optimistic: 'The room for maneuver is limited without deep structural reforms.'
The background involves increased pressure from the European Union, which initiated an excessive deficit procedure against France in June 2024. Bond markets reflect this uncertainty, with a yield spread over German bonds reaching 80 basis points.
The article notes that investors are exercising caution, fearing a recession or rising interest rates. A French Treasury official stated: 'We are committed to a credible plan, but trust is rebuilt over time.' Despite this, reactions from sovereign funds and rating agencies, like Moody's maintaining its Aa2 rating with a negative outlook, indicate ongoing skepticism.
This situation highlights France's post-pandemic and inflationary fiscal challenges, where social spending and green investments heavily burden public accounts.