France Considers Citizen Bonds and ECB Debt Offset as 2025 Deficit Forecast Exceeds 6 Percent

The proposals emerged as France's public spending reached 57 percent of GDP and the budget deficit is projected above 6 percent for 2025. Prime Minister Sébastien Lecornu extended corporate profit levies and high-income minimum taxes while introducing charges on luxury assets and imports. These measures follow repeated failures to meet EU fiscal targets and coincide with stalled austerity efforts blocked by street protests and legislative fragmentation.

Primary records show the French debt-to-GDP ratio above 110 percent with interest costs rising faster than nominal growth. The LIOT plan claims 25 billion euros in savings over ten years by shifting holdings domestically, yet offers 3.5 percent yields against inflation above 3 percent. Mélenchon's write-off targets roughly 18 percent of debt but would trigger immediate repricing in secondary markets and conflict with ECB statutes prohibiting monetary financing.

Competing incentives pit domestic fiscal relief against treaty obligations under the Stability and Growth Pact and the risk of capital flight. Germany and the Netherlands have signaled opposition to any mutualization or selective default within the Eurosystem. France's position weakens further as private investment contracts while welfare obligations expand.

Market data indicate French 10-year spreads over German bunds have widened steadily since 2023. Absent spending restraint or growth above 1.5 percent, rating agencies are expected to review France's AA status within 18 months.