Premier Acte, Premier Scène
Earlier this week, France announced a significant fiscal policy shift, unveiling plans to implement €60 billion in spending cuts and tax increases in 2025. This move, spearheaded by Prime Minister Michel Barnier, aims to address the country’s widening budget deficit, and restore investor confidence.
As of 2024, France’s debt-to-GDP ratio stands at approximately 112%, significantly above the Maastricht threshold. This high level of debt is a result of increased public spending to support the economy during the pandemic and subsequent recovery efforts. The government’s plan to slice spending and hike taxes is a direct response to this fiscal imbalance, aiming to bring the deficit down to 5% of GDP from an estimate of over 6% this year.
Getting the right balance of measures in next year’s budget is a delicate challenge for Barnier, whose premiership is tenuous given his centrist coalition does not have the numbers to ward off a concerted opposition attempt to topple the government. Adding to the pressure, investors have been dumping French assets in recent months on concerns over slippage from deficit reduction goals and political stability after snap elections delivered a deeply divided lower house.
The budget will be submitted to cabinet and parliament on October 10 for debate and amendments. It is likely that Barnier will resort to a constitutional tool to bypass a vote as he has no majority and there is a convention in France for opposition lawmakers to oppose budget bills. However, if he does use that option, it gives lawmakers another chance of tabling a no-confidence motion to try to bring down the administration.
Current parliamentary math means the greatest threat to his government’s survival would come from Marine Le Pen’s National Rally backing a censure motion from the left. For now, she has said her far-right party would refrain from such a move to avoid being responsible for plunging the country into political “chaos” again.
Still, Barnier must also manage criticism within his own camp. Some lawmakers in the narrow group backing the minority government have warned they would not support tax increases that risk undoing seven years of pro-business policies during Emmanuel Macron’s presidency.
It appears Mr Barnier could be caught between a rock and a hard place, and this could just be the opening act of what becomes a drawn-out saga, or worse.
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