France faces debt drift without spending cuts, pension reform: OECD

[PARIS] France’s already heavy debt burden is at risk of rising steadily higher unless the government delivers deeper spending cuts and restarts stalled pension reforms, the OECD warned on Tuesday (Jun 30), as slowing growth adds pressure on public finances.

The Organisation for Economic Co-operation and Development said in a report on the euro zone’s second-biggest economy that France’s fiscal position remains stretched, with the deficit expected to stay around 5 per cent of gross domestic product in 2026 and public debt continuing to climb towards 119 per cent of output.

To stabilise debt in the years ahead, the OECD said France will need a cumulative fiscal-tightening effort worth three percentage points of GDP by 2030, well beyond any measures that have been introduced.

With an April 2027 presidential election looming, future governments will have to tackle France’s public spending, which remains significantly higher than its peers.

A central plank of any strategy to get the finances under control is the resumption of a 2023 pension reform, which gradually raises the legal retirement age to 64 from 62. It was put on hold last year until after the election.

The Paris-based OECD urged the government to restart the overhaul as planned and ultimately link retirement age to life expectancy, a potentially explosive suggestion in a country that has experienced major strikes and street protests over pension reforms.

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Without such changes, rising pension and healthcare costs will continue to weigh on already strained finances even as higher interest rates lift borrowing costs, the OECD said.

The warning comes as the economic backdrop weakens. After growing 0.9 per cent in 2025, France’s economy is set to slow to 0.7 per cent in 2026 before edging up to 0.8 per cent in 2027, reflecting ongoing political uncertainty, higher interest rates and external shocks.

Subdued growth will make deficit reduction harder, particularly as higher interest rates push up debt-servicing costs and limit fiscal flexibility. While exports and a resilient labour market have provided some support, consumption and investment remain fragile, the OECD said. REUTERS