France is an economic time bomb

The immediate issue is the 2026 budget. Prime Minister Sebastien Lecornu resigned due to an inability to negotiate a budget for 2026. Still, President Emmanuel Macron and Lecornu insist that a path to a budget compromise remains possible. Time will tell. However, the political crisis is pushing up interest rates among the countries that make up the European Monetary Union. Through the European Central Bank, the Union backstops France’s sovereign debt. The crisis also weakened the euro relative to the United States dollar.

France’s major problem?

Any budget deal will be a fudge that fails to put France on a path to fiscal stability. France will continue to violate the fiscal deficit limits of the European Union. But France must reduce its annual fiscal deficit to 3% of GDP, or, at least, set a credible path to reaching

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