France is currently navigating a period of political and economic uncertainty, while Bitcoin is experiencing a surge in price following the U.S. Federal Reserve's recent interest rate cut.

France's Political Landscape

France is facing significant political instability. Following the 2024 European Parliament election, President Emmanuel Macron dissolved the National Assembly, leading to snap legislative elections. The elections resulted in a hung parliament, split between the left-wing New Popular Front, Macron's Renaissance party, and the far-right National Rally. This fragile political context has led to the formation of short-lived minority governments, with frequent changes in prime ministers. Sébastien Lecornu is the current Prime Minister, his arrival coinciding with widespread protests against budget cuts.

The core issue is that the French socioeconomic model is proving difficult to reform, especially with the rising cost of public debt. Efforts to reduce public spending have triggered widespread discontent, as seen in the "Let's Block Everything" protests. These protests echo the Yellow Vest movement, highlighting the frustration of the poor and middle classes who feel the burden of budget cuts while the wealthy remain unaffected. The political instability raises concerns about France's ability to address its growing debt and implement necessary reforms. Some analysts suggest that France's domestic instability could lead to a disruptive presidential election in 2027, potentially resulting in a victory for the far-right.

France's Economic Outlook

France's economic activity is expected to decelerate in 2025, with GDP growth slowing to 0.6% due to fiscal adjustments and trade-related uncertainty. While a recovery to 1.3% growth is projected for 2026, this relies on investment recovery and increased consumer spending supported by higher real wages. The government deficit is forecast to decline to 5.6% of GDP in 2025 but is expected to edge up to 5.7% in 2026. Public debt is projected to increase to 118.4% of GDP by 2026. Inflation is expected to fall below 1% in 2025, driven by falling energy prices. The labor market is also expected to soften, with employment declining by 0.2% in 2025 before bouncing back in 2026.

Bitcoin's Price Surge

In response to concerns about a weakening job market, the U.S. Federal Reserve cut interest rates by a quarter of a percentage point. This move, the first rate cut since December 2024, has been interpreted by crypto analysts as a potential boon for markets. Bitcoin's price experienced a pump following the announcement. Some analysts predict that Bitcoin could reach new all-time highs of around $130,000 by the end of the year, while Ethereum could rise as high as $6,000.

The Fed's rate cut is expected to inject liquidity into the market, potentially driving up the price of Bitcoin. Lower interest rates typically reduce borrowing costs for homes, cars, and business loans, encouraging investment and spending. Additionally, a weaker dollar, often a consequence of rate cuts, can make Bitcoin more attractive to international investors. Historically, crypto prices have shown a strong correlation with liquidity cycles, with significant growth observed after the rate cuts following the COVID-19 crisis in 2020.

While the rate cut has sparked optimism, some analysts caution that a price correction is possible in the short term. The market may have already priced in the rate cut, leading to a "sell the news" pullback. Nevertheless, the long-term outlook for Bitcoin remains positive, with expectations of further gains as the Fed is projected to implement two more rate cuts before the end of the year.