French economy 'headed for a wall' as GDP shrinks, finance minister warns

The French economy contracted in the third quarter, data showed Friday, and could be "headed for a wall" if the government is unable to get a deficit-reducing budget passed soon, the finance minister warned.

Gross domestic product shrank by 0.1 percent in the three months to September, the national statistics office Insee said, amid deepening concerns about the state of public finances and growing political tensions ahead of presidential elections next spring.

The decline came as inflation accelerated to 3.4 percent on an annualised basis in October from 3.1 percent in September, the fastest rate since January 2024, Insee said.

The French economy had already stagnated in the second quarter after contracting by 0.2 percent in the first.

"For three quarters now, there has been no growth," Finance Minister Roland Lescure told France Info radio.

"The conclusion to be drawn from all this is that, as of 2026, the French economy is at a standstill," he said.

"France is not heading toward a crisis. But if we fail to achieve the turnaround outlined in the budget, we are headed straight for a wall."

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Insee calculated that production of goods and services fell by 0.1 percent from July to September, while household consumption expanded by 0.4 percent.

Investment contracted by 0.6 percent, and foreign trade also made a negative contribution to growth, shaving 0.6 percentage points off GDP growth.

Analysts said the GDP data would indeed make it difficult for the government to reach its overall growth forecast of 0.5 percent for the current year or even the 0.4 percent anticipated by Insee and the Bank of France.

Worries about France's high debt and deficits have sent its government bond yields soaring in recent weeks.

An underwhelming 2027 budget plan last month fanned concerns that government spending would remain high ahead of next year's presidential elections in which the far-right candidate Marine Le Pen, seen as a fiscal populist, stands a chance of winning, according to opinion polls.

France has been rocked by widespread anger over the rising cost of living and inequality, with nationwide demonstrations on October 17 degenerating into some of the country's worst rioting in years.

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The Yellow Vest movement and student unions have called for a new day of protests on Saturday.