Why the IMF Says France and Spain Must Speed Up Fiscal Consolidation

The International Monetary Fund’s latest 2026 country assessments send a similar message to both France and Spain: governments should move faster to rebuild fiscal buffers. But the reasons differ. France faces high public spending, weak growth, and implementation risks around deficit reduction, while Spain’s economy is currently stronger but still needs earlier fiscal adjustment to keep debt risks contained and prepare for future pressures.

Why the IMF says consolidation must accelerate

In its 2026 Article IV consultation with France, the IMF warned that fiscal consolidation is progressing more slowly than expected and remains exposed to “significant implementation risks.” Public debt is elevated and government spending is particularly high by euro‑area standards.

France’s public spending reached about 57.5% of GDP in 2025, the highest level in the euro area, highlighting the scale of the adjustment challenge.

Because of these factors, the IMF warned that insufficient fiscal effort could leave France vulnerable to market pressure and future economic shocks.

Spain’s 2026 consultation paints a different short‑term picture. The IMF found systemic financial risks to be low, with households, companies, and banks generally in good financial health.

However, the Fund still stresses the importance of strengthening fiscal space while conditions remain relatively favorable. IMF guidance in recent consultations has emphasized accelerating deficit reduction through a clearer consolidation strategy combining spending restraint and revenue measures.

Different growth and fiscal outlooks

The two countries also differ in their near‑term economic outlook.

France’s growth is expected to remain weak. The IMF projects real GDP growth of about 0.7% in 2026, down from roughly 0.9% in 2025.

Other French central bank analysis also describes the country’s growth trend as modest, hovering just above 1%, reflecting cautious behavior by households and businesses despite fiscal support.

Combined with high debt and large public spending, this slow growth complicates fiscal adjustment.

Spain’s macro‑financial environment currently appears stronger. The IMF notes healthy private‑sector balance sheets and a resilient banking system.

Still, risks remain. Persistent increases in housing prices and signs of easier lending standards could eventually create financial‑sector vulnerabilities if they continue.

Policy measures the IMF recommends

France

The IMF’s core policy recommendation is to prioritize spending restraint rather than relying mainly on tax increases. According to the Fund, revenue‑raising measures alone will not close France’s fiscal gap given the country’s already high tax burden.

The IMF therefore urges the government to reassess spending priorities and contain the growth of public expenditure to bring the deficit and debt onto a more sustainable path.

Spain

For Spain, the IMF’s advice focuses on using the current period of economic strength to rebuild fiscal space sooner rather than later.

Key recommendations from IMF consultations include:

• Establishing a clearer medium‑term fiscal consolidation strategy
• Combining targeted spending reductions with tax‑policy adjustments
• Addressing rising long‑term pension spending pressures and strengthening pension safeguard mechanisms

Without additional consolidation measures, IMF analysis suggests Spain’s public debt ratio could remain above 90% of GDP and eventually rise again as fiscal pressures increase over time.

Why rebuilding fiscal buffers is urgent

Across both assessments, the IMF emphasizes the need for countries to restore fiscal room before the next shock.

For France, the urgency stems from high debt levels and slow progress in deficit reduction, which could expose the country to market pressure during periods of geopolitical or economic stress.

For Spain, the argument is slightly different. The economy is currently performing well, but the IMF warns that favorable conditions should be used to rebuild fiscal space early, especially given potential future pressures such as rising pension costs and possible financial‑sector risks tied to housing markets.

The bottom line

The IMF’s 2026 reviews show two contrasting fiscal situations inside the euro area:

• France: slower growth, high public spending, and delayed fiscal consolidation raise risks to debt sustainability.
• Spain: stronger macroeconomic conditions today, but still a need to consolidate earlier to prevent long‑term debt pressures.

In both cases, the IMF’s message is similar: governments should strengthen public finances now so they have the capacity to respond when the next economic shock arrives.