France on the Brink of Recession: Economic Challenges Intensify
France's GDP fell by 0.1% in the third quarter, according to the National Institute of Statistics and Economic Studies (Insee). This follows stagnation in the second quarter and a 0.2% decline in the first.
Last week, France's borrowing yields exceeded 5%. The social climate remains tense amid nationwide mobilization against the rising cost of living.
This decline in business activity brings the economy close to the brink of recession. Inflation accelerated to 3.4% in October, up from 3.1% in September, marking the highest level since January 2024.
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Experts were not surprised by these figures. Jeremy Pelozo from BCA Research believes that France is likely facing a technical recession in the coming quarters.
The government insists on the need to pass the 2027 budget in parliament, where it lacks a majority. Economy Minister Roland Lescure warned that the country will "hit a wall" if the budget is not approved.
If parliamentary debates fail, the government may resort to Article 49.3 of the Constitution, allowing it to pass legislation without a vote.
Jerome Matys, an economics professor, argues that passing the budget is not "decisive" for reviving economic activity in the short term.
France is facing rising borrowing costs. "Every rate hike gradually impacts the state budget and pressures private investments," he notes.
On Friday, the yield on ten-year French government bonds was 4.9%. The Franco-German spread is around 1.55 points.
Matys emphasizes that the main risk for the economy lies not in the absence of a budget but in the lack of visibility regarding the trajectory of public finances.
