The French National Rally, led by Marine Le Pen, has pledged to save €136 billion annually and plans to reduce public spending to below 50% of GDP by 2032. While the plan acknowledges the need for fiscal consolidation, many of the projected savings appear unlikely to be achieved. The National Rally's reverse budget acknowledges fiscal consolidation, but implementation may be difficult. With the National Rally leading significantly in the first round of polls, its plan is not only important as an opposition proposal but could also form the framework for policy beyond 2027.

Many of the savings figures lack a clear basis or mechanism.

The detailed breakdown of the plan represents an improvement over previous proposals and confirms the National League's recognition of the necessity for fiscal consolidation. However, many measures lack clearly defined foundations or mechanisms, or rely on legal changes and international agreements. Fraud estimates illustrate this problem. The plan allocates €18 billion annually to the new VAT collection mechanism, although the total VAT shortfall is estimated at €9 billion to €15 billion, and includes errors, omissions, and bankruptcies, not just recoverable fraud. Other figures are similarly uncertain. The plan projects annual savings of €4.2 billion from unclear reforms to short-term treasury bond management and €4.4 billion in highway revenue from 2028, although early buyouts of major concessions, expiring only between 2031 and 2036, would cost approximately €45 billion to €50 billion.

National streamlining, EU contribution reductions, and social security savings all face implementation obstacles.

National streamlining is projected to generate nearly €28 billion from 2027, but closing public institutions, restructuring sectors, and cutting staff will take time and incur transition costs. The proposed cuts to France's contribution to the EU budget—€11 billion in 2027 and approximately €19 billion annually thereafter—cannot be decided unilaterally. Changing the EU's self-reliant resource system requires unanimous agreement and approval from all member states. The plan targets €37 billion in social security savings, although the details and deliverability of this amount remain uncertain. Pensions are another major uncertainty. The National Union expects to save €15 billion from tightening the contribution period required for verification by one quarter, claiming this will offset the €10 billion cost of lowering the retirement age to 60 or 62. However, independent estimates put the cost of age changes alone at €25 billion to €35 billion annually. Overall, some savings appear reasonable, but not all, and the largest items are among the fewest on record.

The macroeconomic assumptions are overly optimistic, and the fiscal multiplier assumption is far lower than the literature suggests.

The plan's main weakness lies in its incorporated macroeconomic framework. Nearly half of the adjustments will be implemented in 2027, resulting in a net improvement in the fiscal balance of approximately €66 billion. Such fiscal austerity will inevitably drag down demand and economic activity, consequently impacting tax revenue. However, the plan assumes GDP growth of 0.9% in both 2026 and 2027, accelerating to 1.8% in 2028, despite most fiscal adjustments occurring early in the president's term. This trajectory seems unattainable. It assumes the fiscal shock will have little impact on activity in 2027, and any consequences will quickly subside thereafter. In fact, the document assumes a cumulative contractionary effect of only 0.5 percentage points from spending cuts. This translates to a fiscal multiplier of approximately 0.13, well below the typical 0.5 to 1.5 range found in economic literature. Under more conventional assumptions, the negative effects could reach several percentage points of GDP. Some of the initial savings will be offset by lower tax revenue and higher social spending. Meanwhile, the plan assumes tax cuts, purchasing power measures, and competitiveness reforms will contribute 2.8 percentage points to cumulative growth over five years (2027-32). After a contractionary effect of only 0.5 percentage points, this yields a net gain of 2.3 percentage points over five years. This is an unusually favorable combination of small and short-lived fiscal costs and large and rapid supply-side gains.

The interest rate assumptions are favorable, but the improvement will not happen automatically.

The interest rate assumptions are also favorable. The plan assumes an average refinancing rate of 4.5% in 2026 and 2027, decreasing to 3.8% from 2028 onwards. It also assumes that restored fiscal credit will narrow the yield spread between French and German bonds by 40 to 50 basis points, reducing French financing costs by 90 basis points. However, this improvement will not happen automatically. It will depend on the government's ability to obtain approval for and implement the plan, its relationship with the EU, the response of economic growth, and the broader interest rate environment. Le Pen also stated that once public finances are under control, France should discuss intervention with the European Central Bank to alleviate its interest rate burden. However, the nature of the requested intervention remains unclear and inconsistent with the plan's assumption that fiscal credit itself will mechanically reduce the yield spread between French and German bonds by approximately 90 basis points.

The constitutional "golden rule" may be constructive, but it does not inherently save money.

One potentially constructive element is the proposed constitutional "golden rule." If approved by a referendum, it would require deficits to be kept below the level needed to stabilize the debt-to-GDP ratio, and further below that threshold by 0.5 percentage points, provided public debt remains above 60% of GDP. Such a rule could strengthen France's fiscal framework and help reassure markets by imposing constraints on future deficits. However, it would not generate the necessary savings on its own. Its effectiveness will depend on its legal design, approval, and enforcement, as well as the government's ability to adopt measures consistent with the rule.

Summarize

The National Rally's fiscal plan sets ambitious targets for fiscal consolidation and identifies broad potential savings. However, the current form of the plan may be insufficient to address France's public finance challenges. A significant portion of the announced savings is unlikely to be fully realized or within the stipulated timeframe due to legal, institutional, and enforcement constraints, as well as the macroeconomic effects of adjustments. The resulting improvement in the fiscal balance may be less than expected, especially given that the National Rally's plan includes additional spending. Future developments will depend on the specific implementation details of the National Rally's plan, the outcome of the referendum on the Golden Rule, negotiations with the EU, French economic growth and the interest rate environment, and market reactions to France's fiscal credibility. If the plan is poorly implemented or economic growth falls short of expectations, France's fiscal challenges may persist, and the Franco-German interest rate differential may remain high.