France's budget deficit for 2024 turned out to be smaller than initially anticipated, providing some relief for the government amidst its efforts to reduce its debt burden. The deficit widened to 5.8% of the country's economic output from 5.4% in the previous year, according to data from Insee. This was better than the Finance Ministry's projection of around 6%.

The improved deficit situation comes at a crucial time for France as it has faced challenges in reducing the deficit following the impacts of the Covid-19 and inflation crises. The recent fiscal challenges, combined with political uncertainties after snap elections, led to a sell-off in the bond market.

Reducing the deficit to 5.4% of the gross domestic product this year and meeting the European Union's 3% limit by 2029 is a key goal for the government. However, achieving these targets is becoming increasingly difficult due to sluggish economic growth and President Emmanuel Macron's commitment to increasing defense spending as part of a broader European rearmament effort.

Despite the potential increase in military expenditures, Finance Minister Eric Lombard has stated that France remains committed to its fiscal goals, suggesting that cuts will need to be made in other areas to achieve them.

France has received warnings from credit-rating agencies in recent months, with Moody's downgrading its assessment and both S&P and DBRS assigning negative outlooks. Public spending in France increased by 3.9% in 2024, while tax revenues grew by 3.1%. The country's public debt rose to 113% of economic output by the end of 2024, up from 109.8% the previous year and 97.9% before the pandemic in 2019.