France's parliament passes 2026 budget, ending months of deadlock

A long-running political crisis in Paris eased as lawmakers approved the delayed 2026 state budget, after two no-confidence motions failed to unseat the prime minister. The outcome ends months of parliamentary impasse that had threatened the survival of Sébastien Lecornu’s weak minority government and unsettled markets and European partners.

Lecornu hailed the decision on X, writing, "France finally has a budget." He described the package as a "parliamentary compromise" which "curbs public spending" and "does not hike taxes for households and businesses." The prime minister had earlier defended a sizable increase in defence outlays as the "heart" of the plan and acknowledged that previous procedural moves to push the bill through without an immediate vote amounted to a "partial failure."

The budget contains several notable fiscal choices. The government is aiming for a deficit near 5 percent of gross domestic product, a figure that keeps France well above EU reference levels and under continued scrutiny from Brussels. The text includes an extra tax on large companies’ profits expected to raise roughly €7.3 billion in 2026 and smaller increases for some business levies, even as officials stress households will be spared broad new charges. Defence spending is set to rise by about €6.5 billion.

Negotiations consumed nearly two years and followed a snap election called in 2024 that produced a hung parliament. The contest over next year’s spending has already claimed two prime ministers and repeatedly exposed the limits of coalition governance in a fragmented assembly. Socialists, acting as a pivotal swing group, withheld support for the no-confidence motions in return for targeted concessions that helped secure passage and extracted key policy gains.

One high-stakes concession concerns the contested pensions overhaul. The timetable for postponing the planned rise in the retirement age remains unclear: government statements link deferral to the period "after next year’s presidential election," while other accounts place the delay as late as January 2028. The lack of a single authoritative timetable highlights unfinished business in the parliamentary record and the need for a clear official text to resolve discrepancies.

Markets responded positively to the new clarity. The spread on French government debt relative to the German benchmark narrowed back to levels last seen before the snap election cycle, reflecting investor relief at a diminished political risk premium. Yet fiscal watchdogs and European officials will be watching whether written commitments translate into durable consolidation rather than short-term fixes.

For now, passage of the budget offers Lecornu a reprieve: a fragile but functioning majority and time to govern into the final year of President Emmanuel Macron’s second term, with a presidential election due in spring 2027. Still, veteran commentator Alain Duhamel summed up the dilemma bluntly: "It’s a political success and an economic failure."

The cabinet and finance ministry must now publish the full legal text and vote tallies to settle outstanding questions on revenues, precise tax measures and the exact schedule for reform measures that have been deferred. The settlement restores momentary calm, but the underlying fiscal tensions that drove the crisis are unresolved.