French economy "at a standstill" adds to budget uncertainty

A setback. French gross domestic product fell by 0. 1 % in the third quarter, the National Institute of Statistics and Economic Studies (Insee) announced (source in French) on Friday, after stagnating in the second quarter and a 0.

2% decline in the first. It is another blow for the government, with Frances borrowing costs having climbed above 5% on the financial markets last week and the social climate still highly volatile, on the eve of a new nationwide day of mobilisation against the high cost of living and in support of young peoples demands. While household consumption is accelerating (+0.

4 %), the fall in output is one of the main drivers of the contraction in French GDP. It is particularly sharp in transport equipment (-3. 5%), dragged down by aerospace (-4.

5 %) and automotive (-1. 5 %). Activity is also declining in the agri-food sector (-1.

5%), which is suffering from the impact of poor summer harvests. This drop effectively leaves the eurozones second-largest economy on the brink of recession. At the same time, inflation has picked up again, reaching 3.

4% year on year in October, compared with 3. 1% in September. According to Insee, this is its highest level since January 2024.

The poor figures do not come as a surprise to experts, given the particularly unfavourable macroeconomic environment. "France is highly likely to experience a technical recession over the coming quarters", says Jérémie Peloso, chief strategist for Europe at BCA Research, speaking to Euronews. "This scenario was already conceivable before the recent budgetary turmoil and the rout on the bond market", he adds.

"We will hit the wall"The government has been shaken by the news and is stressing the need to secure adoption of the 2027 budget on time, in a parliament where it has no majority. Speaking on Franceinfo, Economy and Finance Minister Roland Lescure described the French economy as "at a standstill". He also warned that the country "will hit the wall" if the "recovery" budget is not adopted.

If parliamentary talks fail, the government is not ruling out using article 49. 3 of the Constitution, which allows a bill to be passed without a vote, unless a motion of no confidence is carried. Another possibility is to resort to ordinances, a procedure that has never been used to pass a budget since the creation of the Fifth Republic in 1958.