The European Commission’s proposal to initiate disciplinary steps against France and six other EU countries highlights deepening concerns over their persistent budget deficits, exacerbated by economic fallout from the Covid-19 pandemic and energy price crises. France, as the EU’s second-largest economy, faces intensified scrutiny due to its significant deficit of 5.5% of GDP in 2023, well above the EU’s 3% limit, with public debt soaring to 110.6% of GDP.
With political uncertainty looming ahead of national elections, where Marine Le Pen’s RN party leads in polls, there are fears of fiscal policies potentially worsening the deficit. Market reactions have been volatile, underscoring investor apprehensions over France’s economic stability amidst evolving political dynamics and stringent EU fiscal rules.