French Prime Minister François Bailloux (L) will issue a general policy statement to lawmakers at the Paris Parliament on January 14, 2025.
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Heading towards another vote of trust next week, France is now unexpectedly feeling itself at an unfavourable disadvantage compared to Italy, a country famous for its political upheavals and economic frailty.
Continuing the battle between major French political parties and the unresolved debate over the 2026 budget and the revolving door of the failed prime minister over the past few years, the economist asked, “Is France the new Italy?”
“France’s financial outlook is currently worse than Italy’s,” a European research analyst at Nomura said in a memo on Tuesday.
France’s debt pile reached 113% of GDP in 2024, while Italy was 135%, but the table changed considering the country’s deficit over that period. The indicator shows that Italy’s deficit was 3.4% of GDP, while France’s deficit was 5.8% of GDP.
French Prime Minister François Bailloux called for the vote of trust last week on September 8th. He is about to pass a controversial 2026 budget, which includes a cut of around 44 billion euros ($51.3 billion). The goal is to lower the French budget deficit to 4.6% in 2026. This is far above the EU deficit rules.
Bayrou positioned the vote of trust next Monday as an existential moment for France, informing BFMTV on Wednesday that the situation was “significant and urgent.”
If he and his minority government do not win the vote, the government will collapse less than a year after his predecessor, Michel Barnier’s short-lived administration collapsed, with another PM (5th in less than two years) being chosen by French President Emmanuel Macron.
The situation in France has experienced an expanded spell of political turmoil and economic uncertainty before the current Prime Minister Giorgia Meloni was elected in 2022, putting it at a disadvantage compared to Italy before leading to the European Union’s third largest economic stability.
Italian Prime Minister Giorgia Meloni is taking part in a meeting with President Donald Trump, Ukrainian President Voldymi Zelenki and European leaders held at the White House on August 18, 2025.
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Both France and Italy are under the “excessive deficit procedure” of the European Commission. This is the mechanism used to introduce EU countries in line with the bloc’s fiscal rules that EU countries must not exceed 60% of their GDP and their budget deficits must not exceed 3% of their GDP.
Italy is expected to advance in putting that deficit under control, but France shows no signs of doing so, Nomura outlined.
“However, the French deficit trajectory is fragile, and the possibility of Bayrou’s government collapse identifies the challenges France faces in restraining its spending,” Economists Nomura said in an email analysis.
“A pathetic public view”
Now, French neighbours are only seeing only a few days to find a budget compromise with rival parties on the left (new popular front alliance) and right (national rally) whom they feel they should take power after last year’s decisive election.
Both sides of the political spectrum showed they would not support the centralist government in Monday’s confidence vote after long-term budget debate and rising spending cuts and tax cuts. Proposals to cut two public holidays in France have also dropped significantly.
“The expected decline in Bayrou’s government and the possibility that Congress will not pass this 2026 budget, which could lead to nominal freezes in the 2025 budget.
French Prime Minister François Beilloux will speak at a press conference held in Paris on August 25, 2025.
Dimital Dilkov | AFP | Getty Images
Another possible government in France could collapse, and the prospect of ongoing disagreement over the 2026 budget is untrained for analysts.
“France is already facing unprecedented pressure from financial markets, but next week will present a pathetic public spectacle,” said Mujitaba Rahman, managing director of Europe for Eurasia Group, in an email analysis on Tuesday.
The basic case scenario for the Eurasian Group is that Beyloo loses his vote of confidence. Rahman is called “a gamble that he never wins.”
“Macron will exclude new legislative elections for the time being and appoint the fifth prime minister in 21 months. He will almost certainly appoint his centre and the right prime minister of the centre,” he said, naming the Minister of Finance, Minister of Defense Sebastian Lecorne, Minister of Justice Gerald Derman and Minister of Finance Eric Lombard.
Reflecting the broader financial market nerves around the surprising state of French politics, the yield on French 30-year bond yields fell above 4.5% on Tuesday, reaching the level last seen in 2008, before 4.48% on Wednesday. Other major economies have experienced a rise in borrowing costs this week amidst financial concerns.
