France Faces Budget Deficit Crisis Amid Political Uncertainty

France could see its budget deficit spiral higher this year and next without additional savings, the finance ministry warned. The deteriorating finances add pressure on President Macron, who is struggling to name a new government following snap elections. The deficit risks reaching 5.6% of economic output this year.

France may experience an unexpected spike in its budget deficit this year and the next if additional savings are not identified, according to the finance ministry. The euro zone's second-largest economy is facing increasing political turmoil, exacerbating its financial woes.

This financial shortfall likely means that any new government might have to choose between cutting spending, hiking taxes, or risking the nation's credibility with EU partners and financial markets. The finance ministry's letter unveiled to lawmakers on Monday showed the risk of the public sector budget deficit hitting 5.6% of economic output this year, noted leftist lawmaker Eric Coquerel, head of the finance committee in the National Assembly.

Outgoing Finance Minister Bruno Le Maire emphasized the critical need for France to continue budget cuts to prevent the deficit from spiraling out of control. Meanwhile, Coquerel attributed the situation to successive tax cuts under President Macron and argued for tax hikes to correct it.

(With inputs from agencies.)