La France, inquiète: Macron has only one year to secure his economic and European legacy

Agora Strategy Executive Briefing on France

Executive Summary

• The fall of the Bayrou-government in September signals that France will remain politically unstable at least until the 2027 presidential election.
  

• During this period, the inability of the political center to agree on reforms makes a deterioration in economic conditions and an intensification of the debt crisis likely.
  

• A victory of the far-right Rassemblement National (RN) in the 2027 presidential election would be a tipping point for the EU and the European integration process.

  
  

Implications for International Business

• Companies already invested in France or planning on doing so should prepare for an end of Macron's pro-European and business-friendly policies, as an RN win in 2027 would most likely imply a nationalist agenda with protectionist policies.
  

• While the debt crisis is increasingly viral and austerity measures loom, demands on the political left are becoming more radical. Violent protests cannot be ruled out in the coming months, increasing instability and political risk in France.

State of Play

Macron’s grip on France’s political system is loosening

In September, President Macron appointed Sébastien Lecornu as the fifth prime minister since he started his second presidential term in 2022. Governments have been changing rapidly after the president’s party, and its allies lost their majority in Parliament in 2022. Since only 15% of French voters think positively of Macron today, the president lacks legitimacy to counter the loss of confidence in the political establishment. Numerous politicians, particularly right of center, are preparing for his succession in 2027 when a term limit kicks. The ongoing instability will likely benefit forces at the political extremes and especially Marine Le Pen’s RN. The next test of the political balance of power is programmed for March 2026 with the nationwide local elections.

Key Issues

Inability to reform makes radical solutions more likely

The last two prime ministers, Francois Bayrou and Michel Barnier, both toppled over budget plans. In view of rising deficits, French politicians, especially those on the center-right, have for decades called for greater budgetary discipline without implementing corresponding savings plans or reforms. French sovereign debt keeps climbing up after the deficit rose by an extraordinary 5,8% of GDP in 2024. That same year, the European Commission launched an excessive deficit procedure, expecting France to meet the Eurozone’s Maastricht criteria again in 2029. The procedure reflects growing concerns about the stability of the eurozone. Some observers have likened France's financial situation to that of Greece during the sovereign debt crisis. Unsurprisingly, days after the fall of the Bayrou government, Fitch Ratings downgraded the government's credit rating from AA- to A+, as analysts do not trust the French to comply with eurozone rules and austerity plans and cut new borrowing.

France’s debt problem extends beyond successive governments’ inability to rein in the deficit. New debt has been taken on in recent years to mitigate economic consequences of exterior shocks. Facing the lockdowns during the COVID pandemic, Macron promised to do “whatever it takes” to protect French households from rising living costs and economic instability. Similar dynamics were at play during the energy crisis following Russia's invasion of Ukraine in 2022. Significant parts of the deficit thus indirectly benefited all French citizens alike. Yet, while new Prime Minister Lecornu has launched negotiations for the 2026 budget, responses to the national debt-problem vary significantly across the political spectrum. The French left seeks to tax large fortunes much higher to increase fiscal justice, with one key proposal made by UC Berkeley economist and director of the Paris-based EU Tax Observatory, Gabriel Zucman. Opponents on the right fear that the “Zucman-tax” will drive away investment and entrepreneurs and undo the positive momentum that Macron’s supply-oriented policies have created since 2017. The far right, for its part, is calling for radical cuts in specific areas of public spending: French transfers to the EU are to be reduced, international development aid is to be reviewed. Although their economic plans have become less radical (like “Frexit”) and more coherent, a RN-led government would add another €14bn to the French deficit without credible growth reforms. France's borrowing costs already match those of Italy and RN economic policies would deepen investor mistrust, further raise borrowing costs, and erode the country's competitiveness in the Eurozone. In addition, leading politicians (including Macron and Bayrou before his demise) have promised referendums. Also, the RN claims to be in favour of more direct democracy, a key demand of the Yellow Vest movement of 2018/19: The party wants a referendum on restricting social welfare benefits for people without French citizenship or residence rights – a potentially devastating signal for international professionals and investors.

Continued instability weakens foreign policy capabilities and European unity

For a long time, French politics appeared relatively stable, not least because of the president’s constitutionally granted exclusive powers, in particular in foreign and security policy. Macron’s unchallenged role in foreign affairs, however, belies the fact that France is far from consensual even in these policy areas. One telling example of the growing influence of domestic politics on France’s international policies is the EU-Mercosur free trade agreement. Farmers' associations have announced protests against the deal for the coming weeks, while the European Commission and many member states would like to adopt it as quickly as possible. Any concession at EU level would now come at a high price for Macron. Another example is the noticeable strengthening of nationalist positions in the defense industry. Aircraft manufacturer Dassault, which successfully tapped into export markets in recent years (France was the world's second-largest arms exporter in 2024), is pushing to carry out major future projects at national level and is willing to break with European partners such as Germany and Spain (within the framework of the Future Combat Air System, FCAS). This new mood in Paris could undermine confidence in France's willingness to contribute to security on NATO's eastern flank (currently mainly in Romania and the Baltic states). Instead, nationalist forces may seek to reverse Macron's shift in priorities in terms of France's global presence - from the Global South toward Europe - and resume involvement in its old ‘spheres of influence’ in West and Central Africa, the Middle East, and even the Pacific - at the expense of its European commitments.

As in other countries, parties on the political fringes primarily focus on domestic policy issues such as migration and social justice. However, this does not mean that, for example, the RN’s rise to power would not cause massive disruptions in foreign and European policy. After an electoral victory, a referendum on immigration would challenge European institutions like the Commission or the EU’s courts, with the party exploiting the subsequent clashes in line with its sovereigntist agenda. While the party has given up on earlier calls for withdrawal from the EU or NATO to not scare off potential voters in the French middle class, it would still rattle those institutions. That said, it also promised continuity in foreign policy to allay the concerns of French business associations such as Medef.

Still, the surge in support for the RN from the MAGA movement, seeking to strengthen right-wing populists across Europe, means that the 2027 presidential election could be decisive for the future of the entire EU. In late May, representatives of the Heritage Foundation met with RN leaders in Paris. The French far right is seeking American support in the upcoming presidential election; some dream of a French equivalent to “Project 2025.” If France falls to the hard right in 2027, it could trigger a domino effect in Europe and end the European unification process in its current form.