Macron’s final budget hinges on Le Pen’s backing … for now
Paris is proposing €43B in savings to get the budget deficit down to 5% of GDP.
The French government introduced a €43 billion budget savings plan for 2027 in an effort to appease Marine Le Pen's National Rally party and reassure markets concerned about France's deteriorating financial situation. Economy and Finance Minister Roland Lescure stated that the government aims to return to consolidation by the end of the decade.
The proposed budget includes €9 billion in spending cuts, a freeze on pension inflation adjustments, and a temporary tax on large corporations, expected to generate €5 billion. Prime Minister Sébastien Lecornu sought to cut the budget by €54 billion, but Lescure reported that existing measures would save €11 billion in 2027. The government pledged to increase its annual contribution to the European Union budget by €2.5 billion, as mandated by the bloc.
Lawmakers from various parties believe the National Rally could support the budget, enabling Le Pen to appear responsible and avoid a financial crisis while retaining the ability to modify the budget if elected. Le Pen stated at a recent Paris event that she would amend, not block, the budget. However, Charles de Courson cautioned that the National Rally may still challenge Prime Minister Lecornu's government.
Borrowing costs for France have reached their highest since 2008, and the premium on French 10-year bonds over German bonds has surpassed 130 basis points, the highest level since the 2012 eurozone crisis. Despite these concerns, Lescure dismissed warnings of an impending crisis as the work of "prophets of bad luck."
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