France has become less attractive to foreign investors

France is missing out on the investor optimism that has defined Europe's markets this year, hamstrung by its strained public finances and political volatility that threatens to paralyse policy until at least 2027.

- Yoruk Bahceli and Leigh Thomas, Reuters

Global investors and French executives cite the risk that budget negotiations could trigger another government collapse in the autumn, while pessimism among French households is dragging on consumer spending and economic growth.

Centrist Prime Minister Francois Bayrou has faced eight no-confidence motions in parliament since taking office in December and his minority government is now struggling to find 40 billion euros ($47 billion) in spending cuts for the 2026 budget. The contrast with neighbouring Germany, whose new government is preparing to loosen historically tight purse strings and pump billions into the economy through defence and infrastructure spending, could hardly be starker. “While all the other highly indebted European countries—Greece, Portugal, Spain and Italy—have taken advantage of years of inflation to reduce their public debt ratio, France — whose deficit is now the highest in the euro zone — is increasingly diverging,” said Pierre Moscovici, head of the Cour des Comptes public audit office and a former finance minister.