France‘s government is planning significant spending cuts and tax hikes in its 2025 budget, totaling 60 billion euros ($65.68 billion), in an effort to address its growing fiscal deficit. The new measures, announced by Prime Minister Michel Barnier’s administration, aim to reduce the deficit from the current 6.1 percent of GDP to 5 percent by next year. This is the first step towards meeting the European Union’s limit of 3 percent by 2029.
The country’s national debt is projected to reach nearly 115 percent of GDP in 2025, with interest payments becoming the largest budgetary item, surpassing defense and education expenditures. Finance Minister Antoine Armand emphasized the need for action, stating that France must regain control over its debt and deficits.
To achieve these goals, Barnier plans to implement a temporary surtax on big companies and individuals earning over a quarter of a million euros per year. Additionally, all taxpayers will be affected by plans to restore a levy on electricity consumption.
However, some analysts express doubt about France’s ability to meet its deficit target for next year. Goldman Sachs analysts believe that the proposed consolidation measures rely too heavily on tax increases and may fall short of achieving a deficit target of 5 percent by 2025. JPMorgan economist Raphael Brun-Alguerre predicts that economic growth will also fall short at only 0.7 percent instead of the government’s hoped-for rate of 1.1 percent.
This announcement comes at a politically sensitive time for France as President Emmanuel Macron’s party lost its majority in a snap parliamentary election held on June 9 after losing to right-wing populist National Rally (RN) in European elections.
The left-wing New Popular Front alliance (NFP) and La France Insoumise (France Unbowed) won the most seats but not a majority in June’s election while Macron’s centrist party came second and RN third.
Barnier may face opposition from these parties when trying to pass his budget bill or even face potential no-confidence motions against his government if he uses special constitutional powers bypassing parliament.
Opposition parties have criticized the proposed spending cuts for prioritizing big business over workers’ interests. The National Rally Party has also voiced concerns about immigration policies and social fraud savings being overlooked while burdening French citizens with increased taxes.
It remains uncertain whether these measures will successfully address France’s fiscal challenges or if they will face further political obstacles along their path.