The French minority government is widely expected be toppled in a confidence vote on Sept. 8, as opposition parties ignore Prime Minister François Bayrou’s appeal to them to support his 2026 budget plans.
Bayrou’s finance minister, Eric Lombard, had warned that a collapse could spark so much turmoil that the IMF would have to intervene, though he quickly backpedalled. Lagarde, who was in charge of the IMF during the bailouts of Greece and other eurozone countries a decade ago, suggested this talk was overdone.
She argued that the IMF typically only responds to requests for help from countries that have immediate problems with their balance of payments and which cannot pay their debts.
“That isn’t the case with France today,” she said, adding that the IMF “would probably say that the conditions aren’t met” and would instead tell Paris to “get organized … and put your public finances in order.”
“It is obviously necessary the direction, as regards terms of debt service and debt volumes, be headed downward and that they come back into the limits of what has been agreed” at a European level, Lagarde stressed.
EU rules limit a country’s budget deficit to 3 percent of gross domestic product, but France’s has been well above that level since the pandemic. It is set to stay above 5 percent of GDP this year, while Bayrou is looking for a way to get parliament to approve a budget that would close the gap to 4.6 percent next year.