On September 5, 2024, newly appointed French Prime Minister Michel Barnier arrived at the Hotel Matignon in Paris, France to meet with outgoing Prime Minister Gabriel Attal ) attend the handover ceremony together.
Sarah Messonnier | Sarah Messonnier Reuters
French Prime Minister Michel Barnier announced deep cuts in public spending and targeted tax increases on France’s largest companies and wealthiest individuals on Tuesday, saying there was no other way to narrow the widening budget deficit.
Barnier, who was appointed last month, faces the daunting task of plugging a huge hole in public finances, as a divided parliament and infighting in the minority government will make it difficult to advance reforms.
France’s credibility with EU partners and financial markets is at risk after borrowing costs soared.
“The real sword of Damocles hanging over our heads is our huge financial debt,” Barnier, the 73-year-old former minister and EU commissioner, told lawmakers as he laid out the government’s plans, ignoring comments from France’s far-left Indomitus party. question.
He added that France’s deficit makes its position in Europe weaker.
He said the tax increase would be targeted and temporary, but gave no further details. The dire state of public finances means “there is no alternative”.
According to Le Parisien, Barnier is considering a tax increase of 1.5 to 18 billion euros ($1.7 to 20 billion), including an 8 billion euro increase in corporate taxes and additional taxes on energy companies and stock buybacks.
Barnier, best known abroad for his role as the EU’s Brexit negotiator, said he would reduce the budget deficit – which could be as high as 6% this year – to 5% by the end of 2025, but would have to delay the target date for reaching the euro zone budget. The common deficit target from 2027 to 2029 is 3%.
Charlotte de Montpellier, an economist at ING, said Barnier had too few details to know whether the timetable for deficit reduction was credible and questioned whether tax increases were just Temporary.
“…There is a good chance that these tax increases will become permanent,” de Montpellier said.
reform
Barnier was appointed by President Macron nearly two months after snap elections produced a hung parliament.
He promised more police on the streets and better control of France’s borders, and said he was open to “reasonable and fair” reforms to the pension system – a key reform for Macron despite nationwide There were internal protests, but the reform was implemented in 2023.
To address ongoing concerns about the cost of living, Barnier announced a 2% increase in the minimum wage.
France will also seek investment in the nuclear energy sector, including new reactors, he said.
Despite looking like the most unstable government in France’s recent history, Barnier’s fragile minority government, which brings together centrists and conservatives, may last longer than many think, lawmakers and analysts told Reuters.
Far-right national rallies led by Marine Le Pen have given the government tacit support, but it may have no real interest in taking on greater chaos that could damage its 2027 presidential hopes.
That doesn’t mean it will be easy, especially for the 2025 budget, which Barnier needs to complete within days and submit to lawmakers by mid-October at the latest.
“It is unclear who will most hinder the implementation of his plans: coalition partners or the opposition,” European intelligence analysts wrote in a report.
Le Pen drew red lines after Barnier’s speech, including taking a tough stance on immigration. “Be brave,” she urged him.
The left-wing coalition won most seats in the election but fell short of an outright majority, and Macron chose not to appoint a prime minister from the coalition.
France’s indomitable MPs waved voter cards as Barnier spoke, saying votes were being “stolen” and there should be a left-wing prime minister.
“The French didn’t vote for you,” some shouted.
Barnier acknowledged that the election had divided parliament but said his government must push for reforms.
“The French will not forgive us for standing still,” he said.
