France passes short-term budget to avoid "US-style" government shutdown

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On Tuesday, the French National Assembly passed a provisional budget bill for 2026 to ensure the continued operation of the government into January next year, after lawmakers failed to reach consensus on a full fiscal budget.

This temporary budget mechanism, known as the “special law (loi spéciale),” was also implemented at the end of last year. The bill allows the government to continue collecting taxes and borrowing even without a complete budget being passed. In practice, this law rolls over the fiscal arrangements from 2025 into the new year, and the Senate is expected to approve it later on Tuesday.

After French lawmakers failed to compromise on a budget plan last Friday, Prime Minister Sébastien Lecornu was forced to seek this emergency measure. The deadlock in parliament has postponed budget discussions into the new year and has heightened concerns over the government’s ability to effectively control the fiscal deficit.

Last week, the French government warned that the measures already agreed upon in the budget bill can only reduce the 2026 fiscal deficit to 5.3% of economic output, down from 5.4% this year. In the initial plan, Lecornu set a target to lower the deficit to 4.7%, but he later stated that the deficit should at least be kept below 5%.

France’s public finances are under close scrutiny by investors and credit rating agencies, with its deficit levels among the highest in eurozone countries.

Media reports say that in France’s highly divided parliament, the minority government led by Lecornu has virtually no room to maneuver. Since President Macron lost his relative majority in the snap election of 2024, repeated budget disputes have led to the downfall of several governments.

According to a government spokesperson, Macron has told cabinet ministers this week that he hopes to pass a complete budget as soon as possible.

Analysts believe that, with time running short and broad compromise difficult to achieve, Lecornu might resort to a constitutional mechanism that allows the government to push legislation through without a parliamentary vote—a step he had previously promised to avoid. If he can gain tacit support from Socialist Party lawmakers, this approach could still lead to the passage of the 2026 budget. Although this move could trigger a vote of no confidence from the far right or radical left, such a motion is unlikely to pass without Socialist support.

The French National Assembly is expected to resume debate on the full budget during the week of January 5.

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