French economy "at a standstill" adds to France's budget crisis risk

A poor performance. France's 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 contracting by 0.

2% in the first. This is a new blow for the government, coming just after France's borrowing costs passed 5% on financial markets last week and with the social climate still extremely tense, on the eve of another nationwide day of protests against the high cost of living and in support of young people's demands. This drop in activity effectively puts the eurozone's second-largest economy on the brink of recession.

At the same time, inflation accelerated to 3. 4% year on year in October, up from 3. 1% in September.

That is its highest level since January 2024, according to Insee. The poor figures do not come as a surprise to experts, given a particularly unfavourable macroeconomic environment. "France is highly likely to experience a technical recession over the coming quarters", Jérémie Peloso, chief European strategist at BCA Research, told Euronews.

"This scenario was already conceivable before the recent budget turbulence and the collapse of the bond market," he added. "We will hit the wall"The government has been shaken and is insisting on the need to get the 2027 budget passed on time, in a parliament where it has no majority. Speaking on the Franceinfo set, 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 the use of article 49. 3 of the Constitution, which allows a bill to be passed without a vote unless a motion of no confidence is adopted.

Another option would be to resort to ordonnances, a procedure that has never been used to pass a budget since the start of the Fifth Republic in 1958. "The main risk for the French economy is not the lack of a budget"According to Jérôme Mathis, professor of economics at Paris-Dauphine University and author of the blog "La finance au cœur de nos vies" (source in French), adopting a budget is not "decisive", in that it would not, "through any kind of leverage effect, miraculously restart activity in the short term". "On the contrary, a budget adjustment plan generally tends to weigh on growth in the immediate term.