French Prime Minister plans to announce tough choices on the budget to break free from the perilous debt cycle
France's Prime Minister François Bayrou has unveiled a comprehensive plan aimed at saving approximately €43.8 billion in 2026, as the country grapples with a public debt of around €3.3 trillion. The ambitious strategy, which aims to reduce the budget deficit from 5.8% of GDP in 2024 down to 4.6% by 2026, includes several measures designed to cut spending and increase revenue.
The proposed measures, presented in two phases, focus on stopping the debt and moving forward with production. Key aspects include eliminating two public holidays, implementing a freeze on tax thresholds and pensions, cutting healthcare spending, and emphasizing a national effort where "everyone" contributes to the fiscal consolidation. Notably, Bayrou suggested removing Easter Monday and the May 8 holiday commemorating WWII victory, but he remains open to considering other holidays for elimination.
However, the political landscape in France is fraught with challenges. Bayrou's budget proposals are politically risky, as they attempt to balance the demands of his allies and the moderate left, upon whom his minority government relies for survival. The government faces a likely autumn parliamentary showdown, with strong possibilities of a no-confidence vote, which could lead to another snap election.
Despite the political tensions and fragmented parliament, there is plausibility that the budget’s broad outlines could be adopted. Nevertheless, the political uncertainty linked to austerity measures is expected to weigh down on economic activity, with GDP growth forecasted at a modest 0.5% for 2025.
Bayrou framed the fiscal situation as a "curse" of over-indebtedness requiring urgent action, warning that failure to act could lead France into a debt crisis similar to Greece’s experience in the late 2010s, which involved harsh austerity measures and public sacrifices.
The proposed austerity measures, which also include fresh cuts of €5 billion due to the soaring debt, face opposition from various quarters. Left-wing lawmakers are opposed to any further spending cuts, while the right is against increases in taxation. The far-right National Rally has suggested it could help topple the government when Bayrou presents the full budget in the Autumn.
In addition to these challenges, France faces a significant burden in terms of interest payments. The country is set to pay €67 billion in interest payments this year alone. Seven Nobel laureates have urged France to adopt a tax on 'ultra-rich' as a means of generating additional revenue, but it remains to be seen whether this proposal will be considered in the budget discussions.
As France prepares for local elections in 2026 and presidential polls in 2027, the various options for savings risk upsetting parts of the population and voters. The government aims to reduce the deficit to 4.6% by 2026, but achieving this goal will require finding at least €40 billion in savings in a single year, a daunting task that could further exacerbate political and economic tensions.
- The proposed austerity measures in France, aimed at reducing the public debt and achieving a deficit of 4.6% by 2026, have sparked discussions in international politics and general news.
- president Putin of Russia and other global leaders may closely follow France's progress on fiscal consolidation, given its impact on the international industry and finance, including potential implications on the European economy.
- The opposition to the austerity measures in France is not only domestic, as some international organizations and high-profile figures, such as the seven Nobel laureates, have advocated for the implementation of a tax on the 'ultra-rich' to generate additional revenue.
- As France maneuvers through its proposed austerity measures, balancing political support and finding at least €40 billion in savings in a single year, the government's success in meeting its deficit goal could have strategic implications for the nation's status in the global business and political landscape.
