French Prime Minister Sébastien Lecornu is due on Thursday to present a belt-tightening government budget for 2027, with savings predicted to come from freezing wages in the public sector and all but the lowest pensions. A series of targeted tax measures, including on income revenues and VAT, are expected as well.
France is due to present its 2027 budget bill on Thursday after 0930 GMT, seeking to enact unpopular belt-tightening measures that can lower its deficit and appease increasingly twitchy bond investors ahead of next year’s presidential election.
As has become common in France, where the two previous prime ministers were toppled over their austerity plans, the legislation faces a tough ride in a deeply divided parliament, as political clans position themselves for one of the country’s most consequential elections in modern times.
The vote is due to take place on April 18-May 2, with far-right leader Marine Le Pen far ahead in the polls amid a growing backlash against President Emmanuel Macron’s centrist legacy.
According to a plan seen by AFP, the government hopes to reduce the country’s ballooning deficit with €43 billion in "recovery measures”.
If they go through, they would bring the “total effort” in 2027 to “€54 billion”, the document said.
Under the plan, revenue from VAT would increase by more than €7 billion compared to this year, while income tax receipts would rise by €5.7.
But corporate tax revenue would fall by €1.8 billion, the bill showed, a reflection of Macron’s pro-business politics.
In total, net tax revenue in the state budget would increase by €18 billion compared to this year to reach €375 billion, it indicated.
Reuters reported that the budget squeeze would also come from freezing public sector wages and all but the lowest pensions.
Read moreFrench PM vows to cut public spending by €54 billion to reduce deficit
Prime Minister Sébastien Lecornu faces growing pressure from jittery bond investors, volatile pre-election politics and increasingly restless voters over how the €54 billion in budget savings he plans will affect them.
France’s benchmark 10-year borrowing costs have surged to the highest level since 2008 as bond investors question the government’s ability to rein in its deficit and fret over political uncertainty heading into the election.
Meanwhile public sector workers held a strike on Tuesday over a wage freeze in the budget while high school students have blockaded dozens of schools this week in protests over a lack of resources that they say has left classrooms overcrowded, buildings dilapidated and teachers in short supply.
Lecornu has said that the budget squeeze is necessary to get the fiscal deficit back on track after predecessors failed to make much headway in the absence of a majority in parliament since Macron held snap legislative elections in 2024.
His government aims to reduce the budget deficit from 5.4 percent of economic output this year to 5 percent in 2027.
France’s persistently high deficit has pushed the national debt burden to a post-World War Two record of 119 percent of output as of the second quarter, the INSEE statistics office said on Tuesday.
France will have to sell a record amount of debt next year to investors – €340 billion – to fund its fiscal shortfall and refinance a growing amount of bonds issued at rock-bottom rates during the Covid-19 pandemic that are now reaching maturity.
(FRANCE 24 with Reuters and AFP)
