2026 Budget: The French Government Tackles the €40 Billion Challenge

Barely two months after navigating the turbulent passage of the 2025 budget, the French government is already setting its sights on the next fiscal year. Its objective: reduce the public deficit to 4.6% of GDP in 2026. To achieve this, it must identify between €40 and €50 billion in savings. The Finance Ministry is now exploring several avenues — from targeted fiscal adjustments to sweeping spending cuts — while placing hope in a return to economic growth.

A “Budgetary State of Emergency”

According to Economy Minister Éric Lombard, the country is in a “budgetary state of emergency,” driven by long-standing deficits and international tensions, notably the trade war sparked by the United States. Despite the difficult global context, the government remains committed to fiscal consolidation.

No Austerity, But Deep Cuts Ahead

While Lombard insists this is not an austerity plan, he acknowledges that the savings required are “considerable.” The government anticipates cuts across a range of areas: social protection, pensions, public sector staffing, local authority subsidies, and operational costs of state agencies. Some of these measures are already being considered.

Tax Strategy: Shielding the Middle Class, Targeting the Wealthy

The government has ruled out tax hikes for middle- and working-class households and does not plan to increase the tax burden on businesses already weakened by trade uncertainties. However, it is looking to extend the temporary tax on high incomes — initially introduced as an exceptional measure — into 2026. This tax applies to individuals earning over €250,000 annually (€500,000 for couples) and could raise around €2 billion.

Bercy also intends to crack down on “tax hyper-optimization,” whereby affluent individuals use legal loopholes to drastically reduce their tax liabilities.

Controversial Measures Under Review

Some politically sensitive options are back under consideration. These include scrapping the tax deduction for retirees or partially delinking pensions from inflation. Both ideas had been shelved during the previous budget cycle due to public and political backlash.

The government may also once again turn to local authorities, which were already asked to contribute €2.2 billion in 2025. In addition, it is looking to streamline state agencies, cutting staff and operational expenses to reduce overhead.

Counting on Growth and Public Dialogue

Bercy hopes that a rebound in economic growth will boost state revenues and ease the pressure. However, the 2025 growth forecast has been revised down to just 0.7%, weighed down by tariffs introduced by the U.S. administration. Still, Lombard remains optimistic that the outlook for 2026 will be more favorable.

To lay the groundwork, Prime Minister François Bayrou has convened a national conference on public finances this Tuesday, April 15. The event aims to raise public awareness of France’s “budgetary pathologies” and outline the government’s strategy for restoring fiscal balance — one it wants to frame as both responsible and equitable.