The newly installed French government, led by François Bayrou, is indicating a willingness to pursue less stringent spending cuts and tax increases in the upcoming budget negotiations. Economy Minister Eric Lombard stated that the target deficit for 2025 will be between 5 and 5.5 percent of GDP, a slight increase from the previous government's aim of 5 percent. Lombard emphasized that the 2024 deficit is projected to reach 6.1 percent, making excessive cuts counterproductive to economic growth. The new government plans to implement €50 billion in spending reductions and tax hikes, €10 billion less than the previous administration's proposal. Lombard assured that these measures will primarily stem from savings and will not involve new tax increases beyond those already announced. The government is commencing consultations with parliamentary parties on the budget bill, facing the challenge of securing passage in a divided parliament.
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.
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 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.
FRANCE ECONOMY BUDGET TAXES GOVERNMENT
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