Fiscal consolidation is relying in increased revenuesSo far, the consolidation of public finances has relied on increased revenue. This was the case in 2025, when the government managed to meet its deficit target. Revenue is expected to continue rising in 2026 and 2027. Expenditure is expected to remain virtually unchanged, due to rising defence spending and the indexation of social expenditure to inflation, which has been in place to date.
A reduction in the share of public expenditure in GDP appears necessary to cut the public deficit more significantly. However, we do not anticipate this happening before 2028, as the current government does not have the necessary majority in the National Assembly to push through such a policy.
A rise in debt caused by deficitsThe high primary deficit is the main driver of the rise in the public debt-to-GDP ratio (+3.3 percentage points of GDP in 2026). This is expected to remain the case in 2027.
The slowdown in growth is also having an impact, as, since 2025, growth has been doing significantly less to mitigate the rise in the public debt-to-GDP ratio.
The effective real interest rate still plays a relatively minor role in debt dynamics. Its role will strengthen from 2028 onwards (with the expected decline in inflation) and will eventually become the primary driver of the rise in the public debt ratio. From 2030 onwards, primary surpluses will therefore be a necessary condition for stabilising public debt.
