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FRANCE: Gov't Plans EUR40bn Spending Cuts, EUR20bn Tax Hikes In 2025

FRANCE
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The gov't of PM Michel Barnier is planning EUR40bn in gov't spending cuts combined with EUR20bn in tax increases for 2025 to plug a hole in the country's finances (see 'OAT: 10-year OAT/Bund Tightens 2bps As Further Fiscal Plan Details Emerge', 1214BST for market react). The draft finance bill (PLF), to be presented on 10 Oct, is set to provide further detail on the plans as Barnier targets cutting the budget deficit to 5% of GDP in 2025. 

  • Le Figaro reports: "After two major forecast errors on the deficits for 2023 and 2024, the Barnier government seems determined to make more cautious forecasts and make less ambitious commitments than its predecessor. For example, for 2024, [the finance ministry] is counting on modest growth of 1.1%, the same forecast as that of INSEE. For 2025, it also predicts growth of 1.1%, slightly below the economic consensus, which is quite rare for a government forecast."
  • The reported fiscal plans also come as the finance ministry postpones the reevaluation of pensions to July 2025. Les Echos reports that the move could save the gov't EUR3bn.
  • Barnier tried to reach out to various political groups in his 1 Oct policy address, but faces political headwinds. The far-right Rassemblement National appears inclined to give Barnier a chance rather than immediately voting his gov't out, but some within the Macronist Ensemble have said they will not countenance tax increases. Without their support, his minority centre-right gov't risks collapse.  
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The gov't of PM Michel Barnier is planning EUR40bn in gov't spending cuts combined with EUR20bn in tax increases for 2025 to plug a hole in the country's finances (see 'OAT: 10-year OAT/Bund Tightens 2bps As Further Fiscal Plan Details Emerge', 1214BST for market react). The draft finance bill (PLF), to be presented on 10 Oct, is set to provide further detail on the plans as Barnier targets cutting the budget deficit to 5% of GDP in 2025. 

  • Le Figaro reports: "After two major forecast errors on the deficits for 2023 and 2024, the Barnier government seems determined to make more cautious forecasts and make less ambitious commitments than its predecessor. For example, for 2024, [the finance ministry] is counting on modest growth of 1.1%, the same forecast as that of INSEE. For 2025, it also predicts growth of 1.1%, slightly below the economic consensus, which is quite rare for a government forecast."
  • The reported fiscal plans also come as the finance ministry postpones the reevaluation of pensions to July 2025. Les Echos reports that the move could save the gov't EUR3bn.
  • Barnier tried to reach out to various political groups in his 1 Oct policy address, but faces political headwinds. The far-right Rassemblement National appears inclined to give Barnier a chance rather than immediately voting his gov't out, but some within the Macronist Ensemble have said they will not countenance tax increases. Without their support, his minority centre-right gov't risks collapse.