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The new French government has signalled it is willing to push for fewer spending cuts and tax increases in fraught budget talks with parliamentary groups that toppled the previous cabinet over belt-tightening efforts.
French economy minister Eric Lombard told France Inter radio on Monday that “in order to protect growth”, the new target would be to reach a public deficit of between 5 and 5.5 per cent of national output in 2025, slightly higher than the 5 per cent of GDP envisaged by the previous government.
Lombard argued that, since the 2024 deficit was now expected to have reached 6.1 per cent of GDP, it would be too punitive for the economy to aim for cuts totalling more than 1 per cent of GDP this year.
“So we are targeting a deficit that would be between 5 and 5.5 per cent,” he said.
The new government led by François Bayrou would aim for €50bn worth of spending cuts and tax hikes, Lombard said, €10bn less than the mix of tax rises and cuts put forward by former prime minister Michel Barnier before his government was ousted in a no-confidence vote in December.
“It will essentially come from savings. There will be no new tax increases outside of those that have already been announced,” Lombard said.
The minister on Monday started a series of consultations with parliamentary parties on the budget bill. Like Barnier, the Bayrou government faces the challenge of getting the legislation through a sharply divided parliament split between three groups without a clear majority since president Emmanuel Macron called and lost snap elections last summer.
France is facing scrutiny from the EU on the state of its public finances, which are well above the bloc’s 3 per cent of GDP budget deficit limit, as well as from financial markets. Rating agency Moody’s downgraded the country’s sovereign rating in December and spreads against German government debt have widened as the political uncertainty has dragged on.
“Today, the entrepreneurs that I meet are worried. They are worried because we don’t have a budget [and] they don’t know what’s going to happen. But despite that, the economy is holding up,” Lombard said.
France’s GDP growth is expected to slow from 1.1 per cent in 2024 to 0.8 per cent this year, according to France’s economic outlook observatory (OFCE).
Both Macron and Bayrou are under pressure to stabilise France’s political turmoil by putting together a government that can pass the budget and survive another no-confidence vote in the deeply fractured parliament. France had four prime ministers in 2024 — an unprecedented occurrence in the country’s Fifth Republic.
Barnier was toppled after the far-right Rassemblement National and the leftist Nouveau Front Populaire alliance both voted to oust his administration over the budget.
Bayrou’s government is now aiming to convince the centre-left Socialists, communists and greens to support — or at least agree not to vote down — the administration while reducing the leverage the RN holds over the government.
Marine Le Pen’s party used its position as the deciding vote on the budget to extract concessions from Barnier in December, but ended up voting him down after he did not meet all of its “red line” demands.
While initially left-wing parties had seemed open to a deal with Bayrou, who offered concessions and government posts, party leaders subsequently decided he was not offering enough and did not join the government. Lombard was set to meet the Socialists, among others, on Monday.
“I think that there is more prospect of a fruitful dialogue with the left-wing parties than with the RN,” Lombard said, but added he was “open to see where the dialogue leads”.