French government to lay out budget amid record-breaking public debt
The French government, lacking a clear parliamentary majority, faces a difficult political battle as it seeks to pass its budget.
French Prime Minister Sébastien Lecornu is scheduled to present the 2027 draft budget on Thursday, as his administration seeks to trim the country's deficit through spending reductions. The core elements of the budget proposal have been revealed, including pension savings, public-sector salary freezes, and alterations to state-funded sick leave.
The formal submission of the 2027 Finance Bill to the National Assembly is due by October 6th. However, the government must navigate a politically challenging landscape within a fragmented parliament lacking a decisive governing majority, which may result in hard-fought negotiations and a complex parliamentary ordeal.
During a September 17th interview with Le Figaro, Prime Minister Lecornu disclosed plans for a €54 billion reduction in budgetary expenditures, asserting that without these cost-cutting measures, the public deficit could surge to 6.5% of GDP in 2027. The government's goal remains to maintain a deficit of 5% of GDP. Lecornu cautioned that in the absence of austerity measures, the 2027 deficit could approach 6.5% of GDP, and France's debt burden would rise by €10 billion in the following year.
He attributed the need for an additional €10 billion to geopolitical factors and increasing interest rates.
The government is contemplating measures to curb pension costs, such as limiting indexation and reducing the tax deduction for retirees. A decrease in the 10% tax deduction cap is expected to yield an additional €1.4 billion for the state. Presently, France's budget deficit is anticipated to reach 5.4% of GDP this year, one of the highest in the European Union, while public debt nears 120% of GDP.
France's public debt has reached record levels under President Emmanuel Macron's two terms, casting a shadow over the upcoming presidential election.
Political parties on the left and trade unions have criticized the government's budgetary plans as "austerity measures." Arthur Delaporte, spokesperson for the Socialist Party (PS), branded the proposed budget as a "bitter austerity potion," arguing that it contradicts Prime Minister Sébastien Lecornu's pledge to achieve a "compromise."
Trade unions across France called for a strike on Tuesday, ahead of Thursday's budget announcement, primarily in opposition to pay freezes for public-sector workers. France last achieved a balanced budget in 1973, maintaining a robust welfare state with comprehensive worker protections. For decades, accumulated debt remained under 90% of annual gross domestic product from 2008, but it became increasingly burdensome due to steady growth and low-interest rates.
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