France's Economy Shrinks in Third Quarter, Pushing Country Closer to Recession

France's economy shrank by 0.1 percent in the third quarter of 2026, according to fresh estimates from the national statistics agency Insee, pushing the country closer to recession and further complicating the government's efforts to stave off a debt-driven financial crisis.

Finance and Economy Minister Roland Lescure said: 'The French economy is at a standstill. It has to restart.'

In an interview with Franceinfo on Friday, Lescure said this summer's extreme heat and spiking energy prices were responsible for the negative growth.

The minister said the new figures give added urgency for lawmakers to pass the 2027 budget proposed by the government, which aims to bring the deficit down to 5 percent of gross domestic product next year with 43 billion euros in savings.

'If we don't have the budget adjustment we put in the budget, we will hit the wall,' Lescure said.

But France's fragmented parliament failed to pass budgets before the new year in both 2024 and 2025, and the spring 2027 presidential election may further complicate efforts to seek compromise this time around.

That could force Prime Minister Sébastien Lecornu to push through the budget using a constitutional backdoor that bypasses a parliamentary vote, but it would expose the minority government to potential motions of no confidence.

Lescure insisted that adopting a budget for next year was key to 'reassure markets' and relaunch growth in the last quarter of the year.

The French economy also contracted by 0.1 percent in the first quarter of 2026 and recorded no growth in the three months that followed.

That anemic growth will likely complicate the government's pledge to bring the deficit down to 5.4 percent of GDP this year, as the target was based on the assumption the economy would grow by 0.5 percent in 2026.

The European Union's second-biggest economy is being dragged into a vicious cycle of fiscal and social crises, the report said.