French growth forecast at 0.8-0.9% in 2026 compared to 1.7% for Germany according to OFCE marks a historic shift. For the first time in decades, Germany is experimenting with massive stimulus policy while France is committing to measured fiscal consolidation. The year 2026 would largely be one of German growth catching up to French growth, as Germany moves away from being the “sick man of Europe” in recent years.
This reversal of European economic roles raises questions about the effectiveness of national budgetary strategies. France is testing a middle path between stimulus and austerity, maintaining certain future investments despite deficit pressures. The expected performance gap with its main European partner raises questions about strategic choices on both sides of the Rhine.
Germany Breaks with Twenty Years of Budgetary Orthodoxy
Germany decided to turn its back on austerity by voting for a massive fiscal stimulus plan in early 2025. On March 14, 2025, an agreement between CDU/CSU, SPD and the Greens created a special off-budget fund of 500 billion euros over 12 years, intended for investments in infrastructure and defense.
This historic turning point marks the end of the “schwarze Null” (black zero) doctrine that imposed budget balance since the 2000s. OFCE estimates a fiscal impulse equivalent to 40 billion euros (1 point of GDP) in 2026, which would help raise German growth by one point.
This German stimulus will have a positive impact on other eurozone countries, raising the growth of major neighbors by one point, notably through private investment and public consumption. Yet France does not appear to be in a position to fully capture these spillovers.
France Chooses Selective Consolidation
French budgetary policy maintains a restrictive orientation in 2026 with primary budget consolidation of 0.7 points of GDP, despite an assumption of a 0.2 point of GDP increase in military spending. This strategy reveals a complex political trade-off: maintaining the effort to correct public finances while preserving certain strategic sectors.
The France 2030 investment program was reduced by 1.1 billion euros, due to lower consumption by the four operators managing its spending. The government was not initially in favor, but shifted its position after becoming aware of the latest figures.
This approach contrasts sharply with the fiscal effort announced by the government of 40 to 50 billion euros for 2026, which goes through a reduction in public spending by the State, local authorities and Social Security. The difference with Germany is striking: OFCE emphasizes that “with the exception of Germany, which has room for maneuver and the United States which ignores debt dynamics, fiscal impulses will most often be negative.”
The Performance Gap Reveals Two Opposing Strategies
OFCE forecasts particularly weak French growth: 0.8% in 2026 and 1% in 2027. These figures place France behind the eurozone which should show growth of 1.1% in 2026. Including the defense investment plan, OFCE envisages growth of 1.7% in Germany, which could therefore be twice France’s growth.
This divergence is explained by different economic philosophies. According to the General Treasury Directorate, less consolidation would not necessarily have a positive effect on activity if it is accompanied by increased uncertainty for economic agents. Since France is close to its production potential, fiscal consolidation does not risk being self-destructive as it was in 2012.
The High Council of Public Finance considers that the French economic scenario rests on optimistic assumptions, combining significant fiscal consolidation with an acceleration in activity enabled by a recovery in private demand. The growth assumption itself is only just above that of the audited organizations (0.9%).
Limited Spillovers from German Stimulus to France
France is among Germany’s main trading partners and has a significant industrial, technological and defense base. One might have expected significant demand directed at France. Nevertheless, German forecasting institutes do not anticipate significant orders for the French defense industrial and technological base, but rather to American defense sector companies.
The impact of German stimulus on France would be 0.1 additional point of growth in 2025 and 0.2 points in 2026. This estimate assumes that the share of spending directed toward European companies would remain unchanged. With a reinforced “Buy American Act” and national industrial priorities, cross-border spillovers remain modest.
The Test of Intelligent Consolidation
The consolidation undertaken in Italy and France will offset the more expansionist policies observed elsewhere, notably in Germany. Capacity constraints limit the absorption of public funds, which maintains an overall neutral fiscal policy in Europe in 2026.
France is therefore testing an approach of “intelligent consolidation”: financing the increase in the defense budget through savings in other public spending items while preserving certain strategic investments. The political compromise taking shape limits the negative effect on business margins and household purchasing power while avoiding institutional crisis.
This strategy reveals France’s specific constraints: despite the shift in budgetary orientation from 2025 onwards, France is still far from being able to stabilize its debt ratio. The gap between France’s and Germany’s debt ratios now exceeds 50 points of GDP, while they were at the same level twenty years ago.
The French experiment with a middle path between stimulus and austerity runs up against the arithmetic realities of public debt. Faced with German budgetary offensive, France is betting on financial discipline to regain future room for maneuver. The verdict of this strategy will be read in 2026 growth figures: can measured consolidation rival massive stimulus?