Prime Minister Sébastien Lecornu: Resignation after only 27 days – France's government crisis and the lessons for Germany

Politically paralyzed, financially on the brink: What Germany MUST learn from France's crisis now

A political earthquake is shaking France: After just 27 days in office, Prime Minister Sébastien Lecornu has resigned – an unprecedented event in the history of the Fifth Republic. His resignation, shortly after the presentation of a virtually unchanged cabinet, is far more than just a government crisis. It is a symptom of a profound political and financial crisis that has paralyzed France for years and has now reached a dangerous turning point.

Behind Lecornu's swift downfall lies an explosive mix of political deadlock, a crushing national debt exceeding €3.3 trillion, and an oversized welfare state that blocks urgently needed reforms. While the fragmented National Assembly stifles every attempt at austerity, rating agencies are already warning of a deterioration in creditworthiness, and interest rates on French government bonds are rising alarmingly.

This development is a wake-up call for all of Europe, but especially for Germany. The crisis of our most important partner raises pressing questions: How could the second-largest economy in the Eurozone have gotten into this situation? Is a new Eurozone debt crisis looming, one that could drag us down as well? And what lessons must Germany draw from this drama, especially as its own debt continues to rise? The events in Paris are an urgent reminder not to take the stability of our own public finances for granted.

An unaffordable welfare state? The real reason for France's ongoing crisis – and the risky parallel to Germany

French Prime Minister Sébastien Lecornu has unexpectedly resigned after less than a month in office. President Emmanuel Macron has already accepted the resignation, the Élysée Palace announced. The resignation came just hours after the presentation of his new government, an almost unprecedented event in the history of the Fifth French Republic.

The opposition had sharply criticized the largely unchanged government team and again threatened to overthrow it. The right-wing populist leader of the National Rally, Jordan Bardella, immediately called for new elections, something Macron had previously ruled out. Lecornu had to acknowledge that he had no political room to maneuver and that the minority government had virtually no chance of getting the urgently needed budget through parliament.

The structural crisis of French public finances

The root cause of the ongoing government crisis lies in France's dramatic debt situation. With approximately €3.3 trillion, France has the highest absolute national debt in the European Union. This corresponds to about 114 percent of its gross domestic product. Only Greece, at 152.5 percent, and Italy, at 137 percent, are more heavily indebted.

The French budget deficit in 2024 amounted to almost €170 billion, equivalent to 5.8 percent of gross domestic product. This significantly exceeds the European stability criteria of three percent. A deficit of 5.4 percent is projected for 2025, which is still well above EU limits.

Since 1999, the founding year of the Eurozone, France has met the three percent deficit criterion in only a few years. The last balanced budget was over 50 years ago. National debt has increased by one trillion euros since 2017. This equates to an annual budget deficit of 2,400 euros and a debt burden of 55,000 euros per capita in France.

Political instability due to the division of the National Assembly into three parties

The snap elections in the summer of 2024, which Macron called after his defeat in the European elections, did not produce the hoped-for clear majorities. Instead, the National Assembly is split into three strong, almost equally sized blocs:

The left-wing alliance Nouveau Front Populaire emerged as the strongest force with 178 seats, followed by Macron's centrist Ensemble with 150 seats and the right-wing National Rally with 125 seats. The decisive threshold for an absolute majority is 289 seats. This political stalemate is leading to paralysis, votes of no confidence, and a high turnover of government personnel.

Since Macron took office in 2017, 158 ministers have served. The current situation represents the ninth government since Macron's inauguration. A willingness to form a coalition between the three political camps is not apparent, which makes the passage of the urgently needed austerity budget virtually impossible.

The failed austerity measures and their dimensions

Former Prime Minister François Bayrou had presented a drastic austerity plan to break France's spiraling debt. The plan included savings and tax increases totaling €43.8 billion. The deficit was to be reduced from 5.8 percent to 4.6 percent in order to fall below the EU limit of three percent by 2029.

The austerity plan called for a freeze on pensions and social benefits, the elimination of two public holidays to increase working hours, the elimination of 3,000 government jobs, and an increase in the corporate tax rate for profitable large companies to 41.2 percent. Only spending on debt servicing and the military was to increase. The opposition and unions mounted massive resistance to these measures, which ultimately led to Bayrou's ouster by a vote of no confidence.

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France's oversized welfare state

France's structural problems are rooted in its oversized welfare state. Social spending accounts for almost a third of total economic output. The public sector consumes nearly 60 percent of the gross domestic product. By comparison, in Germany, social spending is around 25 percent of GDP.

This structure has developed historically. Since the 1970s, the French welfare state has expanded continuously. This was followed by costly nationalization programs and the introduction of retirement at age 60. The French have internalized a subsidy mentality that is difficult to break. Even the increase in the retirement age from 62 to 64 in 2023 could only be implemented by invoking Article 49.3 of the Constitution, bypassing Parliament.

Deterioration of creditworthiness and rising interest rates

Political instability and the dramatic debt situation are already impacting France's creditworthiness. In September 2025, the rating agency Fitch downgraded France's government bonds from AA- to A+. Standard & Poor's rates France AA- with a negative outlook, while Moody's has set the rating at Aa3 with a stable outlook.

The risk premiums on French government bonds compared to German Bunds rose to almost 80 basis points. French ten-year government bonds now carry interest rates of over 3.5 percent – ​​higher than Spanish bonds and only slightly lower than Italian bonds. France already pays around 67 to 70 billion euros annually in interest payments alone; this figure could soon exceed 100 billion euros.

Danger of a new Euro debt crisis

Economists are intensely debating the potential contagion risks of a French debt crisis spreading to other eurozone countries. With a GDP of €2.9 trillion, France is the second-largest economy in the eurozone. A loss of confidence could lead to contagion effects in Italy, Spain, and other highly indebted countries.

The European Central Bank has a tool, the Transmission Protection Instrument (TPI), to prevent excessive contagion. However, this instrument is subject to strict conditions, including compliance with EU fiscal rules – a condition that France currently does not meet. TPI has never been used to date.

In the short term, however, many economists see no immediate risk of contagion. The French crisis is considered entirely homegrown. Despite its high debt ratio, Italy is currently regarded as unusually stable. The current account balances of the euro countries are more balanced than during the last debt crisis.

Germany as a cautionary example

Germany cannot afford to relax, as its debt situation is also deteriorating steadily. At the end of 2024, Germany's national debt amounted to approximately €2.7 trillion, corresponding to a debt-to-GDP ratio of 62.5 percent. The Federal Ministry of Finance forecasts a further deterioration to 63.2 percent in 2025 and 63.0 percent in 2026.

Germany's debt level has thus already exceeded the Maastricht limit of 60 percent. Per capita debt reached approximately €29,650 at the end of 2024. The main reasons for the increase are high expenditures on defense and social welfare. The special fund of the German Armed Forces alone increased the debt by a further €11.2 billion in 2024.

In addition, Germany is assuming significant liability risks from European debt instruments. Germany's share of the financing for the Next Generation EU coronavirus recovery plan amounts to €109 billion for repayments plus €134 billion in guarantees. In total, these undisclosed amounts represent more than ten percent of Germany's current national debt.

The European stability criteria and their enforcement

The European stability criteria were established in the Maastricht Treaty of 1992. They limit the annual budget deficit to three percent of GDP and total debt to 60 percent of GDP. In case of violations, the European Commission can initiate an excessive deficit procedure.

Ironically, Germany and France were themselves the first major deficit offenders when they failed to comply with the Maastricht criteria during the 2001/2002 recession. Following the financial crisis, the Stability and Growth Pact was tightened with the Six-Pack in 2011. Sanctions are now imposed earlier and more consistently.

The European Commission initiated an excessive deficit procedure against France back in 2022. Despite this, no sustainable improvement in French public finances has been achieved. This highlights the structural limitations of European fiscal rules for systemically important countries like France.

Lessons for Germany and the Eurozone

The French crisis highlights several important lessons for Germany and the Eurozone:

Firstly, even large economies can fall into a debt spiral through decades of refusing reform, from which escape becomes politically almost impossible. France's oversized welfare state and the associated subsidy mentality of its population make necessary structural reforms extremely difficult.

Secondly, political instability leads to a vicious cycle: markets lose confidence, interest rates rise, the debt burden becomes even more oppressive, and further austerity measures become necessary, which in turn provokes political resistance. Germany should therefore use its relative political stability to tackle structural reforms in a timely manner.

Thirdly, it is evident that the European stability criteria are difficult to enforce in systemically important countries. Germany, as the largest economy in the Eurozone, bears a special responsibility to serve as a positive example of sound public finances.

The debt brake enshrined in the German constitution is proving to be a far-sighted decision in light of developments in France. However, it is not enough on its own. Germany must also undertake structural reforms in its social security systems before demographic trends lead to a scenario similar to the one in France.

A welfare state can only be sustainably financed if revenues are adequate and the expenditure structure is designed to withstand demographic changes. France's crisis should serve as a warning to Germany to set the course for sound public finances in good time. Only in this way can Germany fulfill its role as an anchor of stability in the Eurozone and avoid similar crises.

The French government crisis is more than just a domestic political problem of a neighboring country. It is a warning signal for all European countries that structural problems cannot be postponed indefinitely without jeopardizing political and economic stability.

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