French Government Unveils Austerity Budget to Cut National Deficit

Prime Minister Sebastian O'Connor presented a recovery budget on October 1, 2026, designed to narrow the national budget deficit from 5.4% to a 5% target for next year. The plan involves a total fiscal effort of €54 billion, including €43 billion in new measures to restrain spending and increase tax revenues. Proposed cuts include freezing the highest pensions against inflation, removing certain tax benefits for pensioners, and halving the social security deficit. The government also plans new taxes on airports, highways, and large multinational companies.

While the budget aims for consolidation, it also increases the defense budget from $64 billion to $71.2 billion and freezes public-sector wages. These austerity measures arrive as France faces an inflation rate of 3.4% and the highest borrowing costs since 2002. The announcement has triggered investor concerns regarding national debt and coincided with violent student-led protests over school maintenance and staffing, resulting in hundreds of arrests and arson attacks.

Politically, the administration faces a fragmented parliament and record-low approval ratings for President Emmanuel Macron. The far-right National Rally party has increased its influence, recently securing 14 Senate seats. Despite the instability, National Rally candidate Marine Le Pen suggested she may refrain from toppling the government to avoid a budget vacuum before the May presidential elections, preferring to amend the budget if she wins.