Austerity budget against high deficit: France’s government cuts the budget by 60 billion

Austerity budget against high deficit
France’s government cuts budget by 60 billion

October 10, 2024, 9:51 pm

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France’s new government begins with a strict austerity budget. Liberal-conservative Prime Minister Barnier sees a high national deficit as a threat to the country. There was immediate opposition from all political camps in Parliament.

Faced with high national debt, the government of France’s new centre-right Prime Minister Michel Barnier has introduced an austerity budget. Next year, 60 billion euros will be generated through savings and additional income, the government explained after a cabinet meeting. Two-thirds of the billions should be achieved through spending cuts, and one-third through tax increases aimed at companies with high sales and high-income households.

The EU Commission is running deficit proceedings against France due to excessive new debt. France must present an integration plan to Brussels by the end of October. For the current year, France expects a budget deficit of 6.1 percent, which should be reduced to five percent in 2025 and below the European limit of three percent in 2029.

The cuts have been met with criticism

Austerity budget meets resistance in Parliament. Even before the event, there was criticism from the leftist camp and right-wing nationalists. Reservations are also among the government’s ranks of discontent over budget cuts. Criticism also came from the High Finance Council, which scrutinized the government’s plans for their credibility. The Council judged the underlying growth projections to be too optimistic.

Since the government does not have an absolute majority in parliament, it can either pass the budget in heavily modified form or push its version over the heads of parliamentarians through a special clause in the constitution. Shortly after taking office, the budget negotiations became a test of strength for the government. Street protests are not ruled out either.

It is not new that France has not adhered to the three percent limit on the deficit and the 60 percent limit on the national debt set by Brussels. In the past 25 years, France has undergone three separate excessive deficit procedures for a total of 16 years – longer than any other European country.