France's budget battle: Why the government's plan to plug the deficit is sparking an outcry
France’s new government has unveiled its 2025 belt-tightening budget bill, with plans for major tax hikes and spending cuts aimed at tackling the country’s giant deficit
PARIS — France’s new government has unveiled its 2025 belt-tightening budget bill, with plans for major tax hikes and spending cuts aimed at tackling the country’s giant deficit.
Prime Minister Michel Barnier, a conservative, described the massive hole in the public finances as a “ sword of Damocles ” that could bring the euro zone’s second-biggest economy «to the edge of the precipice.”
Still, his budget plans have angered many in the country and are expected to be harshly debated in parliament in the coming weeks, with his government's survival at stake.
France has a high level of public spending driven by generous social welfare programs, healthcare and education — and a heavy tax burden that falls short of covering the costs. For over two decades, the country struggled to keep its deficit below the European Union’s target of 3% of its gross domestic product (GDP).
France's debt increased significantly because of the economic slowdown caused by the COVID-19 pandemic. President Emmanuel Macron applied a “whatever it takes” strategy based on state intervention to save jobs and businesses, including a massive partial unemployment program and subsidized childcare leave.
Following the virus crisis, Macron’s former centrist government vowed to put the country’s finances back on track. But budget overruns and lower-than-expected tax revenues instead dug a bigger hole. This year’s budget deficit is expected to reach 6.1% of GDP.
Barnier, appointed in September following surprise legislative elections, has vowed to reduce it to 5% next year.
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