French Prime Minister Michel Barnier (center) delivers an overall policy statement to the French National Assembly on October 1, 2024 in Paris. A sudden election was held this summer to bring some stability, resulting in a hung parliament causing political chaos.
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France’s embattled new government will unveil its 2025 budget on Thursday, as the euro zone’s second-largest economy faces an ongoing fiscal crisis and a brewing political crisis.
The budget is widely forecast to be an “austerity” one, with new Prime Minister Michel Barnier’s government set to propose tax increases and cost-cutting measures that are likely to anger opposition parties on the left and right, and even Centrist.
On October 1, Barnier delivered his inaugural speech at the National Assembly, introducing measures that the conservative centrist government may propose, including raising taxes on large companies and drastically cutting central government spending to deal with France’s fiscal crisis.
Barnier later revealed that the government plans to tighten fiscal policy by 60 billion euros ($65.9 billion), or 2% of GDP, next year in order to reduce the national deficit to about 5% of GDP by 2025, lower than the 6.1% expected this year .
Of the €60 billion, around €40 billion is expected to include spending cuts within central and local government, including a six-month deferral of the indexation of pension payments, while another €20 billion will come from higher taxes on the “richer classes” of taxes.
The budget will be presented to parliament by new finance minister Antoine Armand, as France has been the subject of excessive deficit procedures by the European Commission because its budget deficit is well over 3% of GDP (gross domestic product) EU the extent to which member states should comply.
Ask for more time to submit long-term budget plans to the European Commission as new EU fiscal rules require countries with higher debt-to-GDP ratios, Barnier’s government is This step is reportedly expected to be taken in the coming weeks.
Barnier told the French parliament last week that this would take until 2029 – two years later than originally promised – Bring the country’s deficit in line with EU rules.
The 2025 budget is the first real domestic test for the prime minister, who inherits something of a poisonous chalice, with France’s fiscal challenges and warring political institutions setting the stage for a new government in a country that has endured months of political uncertainty. After sex provides the context.
On July 7, 2024, in Paris, France, the New Front of the People (an alliance of left-wing parties including the far-left party “French Busumi”) won for the first time in Paris, France. People saw a French flag on the Place de la République.
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Barnier was appointed prime minister by President Emmanuel Macron following his unfortunate decision to hold an inconclusive snap election in June with the right-wing National Rally (RN). win the first round of voting and The left-wing New Popular Front (NFP) won in the second round.
After months of political haggling, Macron appointed conservative Barnier as prime minister, a move that angered the left-wing coalition, which believes the election results were “stolen.” While left-wing lawmakers have introduced a motion of no confidence in Barnier, which failed to pass Tuesday’s vote, the right-wing National Rally is taking a “wait and see” approach, warning that Barnier is a prime minister under surveillance ”.
All in all, Barnier’s government is a fragile one, susceptible to predatory challenges from both the left and right of the political spectrum. If the latest budget reverses Macron’s pledge to resist tax increases by big business, it could also clash with the president who put Barnier in office.
“Austerity” budget
Andrew Cunningham said that if the measures were confirmed when the budget is presented to the National Assembly on Thursday, it would be a sign that France is implementing fiscal austerity “on a scale comparable to that implemented by many countries during the eurozone crisis”. Chief European Economist of Macro.
He warned in an analysis last week that the measures could severely dampen France’s economic activity.
“The budget is reportedly based on forecasts of GDP growth of 1.1% this year and next… but austerity measures of this magnitude may make even 1.1% growth elusive,” he said in an email analysis.
“Finally, even if the budget is passed and does not have much impact on economic growth, France’s fiscal position will still be precarious. The deficit will still be 5% of GDP next year, and the EU will seek to reduce the deficit to 3% by 2020.” 2027,” Cunningham said.
“Therefore, France will still need to take more austerity measures beyond next year against the backdrop of a weak minority government and the approaching presidential election in 2027,” he noted.
political weakness
The budget is the first major test for Barnier’s government, which is largely made up of representatives from Macron’s centrist bloc and Barnier’s center-right Republican party. Lacking a majority, the government now relies heavily on opposition parties that could block it at any time.
To that end, the no-confidence motion tabled by the left-wing bloc on Tuesday showed how Barnier’s government is at the mercy of the far-right National Rally, which has said it would abstain from the vote to give the government “a chance”. Pang said.
Carsten Nickel, deputy director of research at Teneo risk consultancy, noted that the government remains vulnerable to challenges from both the left and the right, and the budget may even have to be forced through if it faces strong opposition.
“The government may struggle to find sufficient support (for the budget). Therefore, it may return to Article 49.3 of the constitution, which states that bills can be passed without a vote unless the National Assembly passes a motion of no confidence against the government,” Nikhil said said the email analysis.
French President Emmanuel Macron arrives before the closing ceremony of the 2024 Paris Olympic Games at the Stade de France on August 11, 2024 in Paris, France.
Tom Weller/Voight | Getty Images Sports | Getty Images
“Macron used this tool to pass his controversial pension reform, but at the time he was able to disincentivize MPs from passing a no-confidence motion by implicitly threatening to dissolve the National Assembly, thereby triggering early elections. Since he made his own Since the decision to hold early votes, however, in June and July, Macron will not be able to dissolve parliament until next summer,” Nicholl noted.
Nicholl said opposition parties on the left and right will therefore weigh the risks associated with voting for or against the government, as well as the possibility of having to vote together to oust Barnier in the future. Both sides are unwilling to work together to achieve this goal, which may bring a temporary reprieve for Barnier’s government.
“It could be risky for the RN to be seen as a force associated with a politically chaotic situation in which the budget has not been passed, the current government has been overthrown and new elections are unlikely to be held before the summer of 2025. Resolve the impasse,” Nickel marked.
Marine Le Pen, Member of Parliament and leader of the French far-right National Rally (Rassemblement National – RN) party, arrived at the RN party headquarters in Paris, France on July 1, 2024.
Benoit Tessier | Reuters
He added that Le Pen still aims to be seen as a responsible actor before running for president again in 2027.
“Instead, Syriza owes its name and existence to the idea that the republic’s values must be defended against a surge in far-right votes ahead of this summer’s snap elections. This context increases the political cost of voting. Le Pen opposes A moderate (if centre-right) government, the issue of coordination between the far right and the left might buy Barnier some time,” Nicol said.