France is under pressure to cut its massive debt, and Lecornu has pledged to reduce the country’s budget deficit to no more than 5 percent of gross domestic product next year. While the retirement reform suspension has dialed down the domestic political temperature, it has also sparked concerns that France isn’t serious about getting its public finances in order as more workers retire and people live longer.
The European Commission has called on France to compensate for the fiscal cost of the suspension by taking other steps and ratings agencies have warned of the economic impact of suspending the reform.
Both Standard & Poor’s and Fitch have downgraded France’s credit to the single-A category while last month Moody’s cut its outlook for France from “stable” to “negative,” highlighting the negative economic impact of the freeze and the risk it could last beyond 2027.
The National Assembly, France’s lower house of parliament, has until midnight to pass the entirety of its social security budget, which focuses on welfare spending and includes the pensions reform suspension. The text then heads to the French Senate.
If the National Assembly votes down the social security budget or fails to hold a vote in time, the Senate will debate the original text proposed by the government.
However, the government has already made clear it would amend it to take into account all the changes approved in the National Assembly, including the suspension of the pensions reform.