France’s New Government Faces Fiscal Crisis and Brewing Political Storm with Upcoming 2025 Budget
France’s newly appointed Prime Minister Michel Barnier is set to present the country’s 2025 budget amidst a looming fiscal crisis and a brewing political storm. The budget, expected to be unveiled on Thursday, is anticipated to include tax hikes and cost-cutting measures to combat France’s fiscal deficit, which currently stands at 6.1% of GDP.
The government plans to tighten fiscal policy by 60 billion euros ($65.9 billion) or 2% of GDP next year, aiming to reduce the deficit to around 5% of GDP in 2025. The measures include spending cuts of around 40 billion euros, including a six-month delay to pension payments, and higher taxes on “wealthy individuals” and “large companies” amounting to 20 billion euros.
The budget comes as France faces an excessive deficit procedure by the European Commission, given its budget deficit exceeds the 3% of GDP level required by EU member states. The government has asked for more time to submit its longer-term budgetary plans to the Commission, which is expected to be done within the next few weeks.
Barnier’s government is fragile and vulnerable to challenges from both the left and right of the political spectrum. The budget may face opposition from various parties, including the left-wing New Front Populaire, which has already filed a no-confidence motion against Barnier, and the right-wing National Rally, which is taking a “wait-and-see” approach.
Economists warn that the measures could put a significant dampener on economic activity in France, with growth forecasts of 1.1% this year and next. The budget’s passage is uncertain, and the government may need to rely on opposition parties to pass it, which could lead to further political instability.
The 2025 budget is a crucial test for Barnier’s government, which is made up of representatives from Macron’s centrist bloc and Barnier’s center-right Republicans party. With no majority, the government is reliant on opposition parties that could thwart it at any moment. The budget’s outcome will have significant implications for France’s economic future and the stability of its government.
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