Euro area outlook

Latest edition · September 30, 2026

France Heading towards the extremes 2026 09 30

France faces acute fiscal and political distress as Prime Minister Lecornu seeks EUR 54 billion in 2027 budget cuts under threat of government collapse. Souring sentiment has pushed 10-year French yields up over 100 bps since July, exacerbated by polls showing far-right and far-left candidates leading ahead of the 2027 presidential election.

SEB outlines mounting risks to France's public finances and political landscape as the Lecornu minority government prepares to table the 2027 budget. With the 2026 deficit projected at 5.4% of GDP and potentially hitting 6.5% in 2027 without austerity, the government needs EUR 54 billion in savings amid sluggish 0.6% GDP growth. Resistance from opposition parties threatens a vote of no confidence. Furthermore, the 10-year French government bond yield has jumped over 100 bps since July as markets price in political risk. Looking ahead to the April-May 2027 presidential election, polls are led by Marine Le Pen (35%) and Jean-Luc Mélenchon (16%), whose populist economic agendas (including lowering the retirement age and challenging EU or debt commitments) could destabilize French debt sustainability and European integration.

Key takeaways from the latest edition

• 1.France faces the risk of its fourth government crisis in just over two years as Prime Minister Lecornu attempts to pass the 2027 budget requiring EUR 54 billion in spending cuts.
• 2.French sovereign risk premiums have expanded significantly, with 10-year OAT yields widening by over 100 basis points since July 1 amid ballooning deficits and potential 6.5% of GDP deficit in 2027 without cuts.
• 3.Polling for the 2027 presidential election indicates substantial support for political extremes, with Marine Le Pen polling near 35% and Jean-Luc Mélenchon at 16%, creating severe fiscal and geopolitical risks for Europe.

What this series covers

• Major spending cuts in the 2027 budget
• Markets are concerned
• Will the government fall?
• Next year's presidential election could bring victory for the political extremes
• Opinion polls ahead of the 2027 presidential election
• The presidential election matters for Europe

Edition archive

• France Heading towards the extremes 2026 09 30

  September 30, 2026

• German economic signals continue to strengthen 2026 09 24

  September 24, 2026

• Major victory for the German far right in Saxony Anhalt 2026 09 06

  September 6, 2026