French PM presents belt-tightening 2027 budget, including frozen wages and new taxes
France 24
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France 24
Original Source
France's government unveiled its 2027 budget featuring €54 billion in austerity measures including frozen public sector wages and new taxes to reduce the deficit. The independent fiscal watchdog warned that planned efforts are insufficient given France's alarming financial situation, with national debt at a post-WWII high of 119 percent of GDP.
The French government's deficit reduction plans in its 2027 budget represent a minimum effort in light of the challenge of getting the finances back on track, the country's independent fiscal watchdog said on Thursday.
The High Council for the Public Finances, which is charged by law with determining whether the government's fiscal plans stack up, said the deficit target for this year of 5.4 percent of economic output was "plausible" though it could still be missed.
Plans to reduce the deficit next year to 5 percent of output are "limited", the watchdog said after the government presented its 2027 budget, adding a "significant" effort was needed to stabilise France's debt.
"The High Council firmly reiterates that the deficit reduction target set for 2027 is a minimum given the alarming state of public finances," it said in its review of the budget bill.
It also said that the government's forecast for economic growth of 1 percent next year is "optimistic", especially if concern about the belt-tightening effort grow and weigh on the outlook.
Read moreFrance to borrow record €340 billion as Covid-era debt comes due
As has become common in France, where the two previous prime ministers were toppled over their austerity plans, the budget bill faces a tough ride in a deeply divided parliament, as political parties 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.
Budget squeeze
According to a plan seen by AFP ahead of the presentation, the government hopes to reduce the country’s ballooning deficit with €43 billion in "recovery measures”.
If voted 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
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.
Prime Minister Sébastien 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.
France’s persistently high deficit has pushed the national debt burden to a post-World War II 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)
The High Council for the Public Finances, which is charged by law with determining whether the government's fiscal plans stack up, said the deficit target for this year of 5.4 percent of economic output was "plausible" though it could still be missed.
Plans to reduce the deficit next year to 5 percent of output are "limited", the watchdog said after the government presented its 2027 budget, adding a "significant" effort was needed to stabilise France's debt.
"The High Council firmly reiterates that the deficit reduction target set for 2027 is a minimum given the alarming state of public finances," it said in its review of the budget bill.
It also said that the government's forecast for economic growth of 1 percent next year is "optimistic", especially if concern about the belt-tightening effort grow and weigh on the outlook.
Read moreFrance to borrow record €340 billion as Covid-era debt comes due
As has become common in France, where the two previous prime ministers were toppled over their austerity plans, the budget bill faces a tough ride in a deeply divided parliament, as political parties 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.
Budget squeeze
According to a plan seen by AFP ahead of the presentation, the government hopes to reduce the country’s ballooning deficit with €43 billion in "recovery measures”.
If voted 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
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.
Prime Minister Sébastien 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.
France’s persistently high deficit has pushed the national debt burden to a post-World War II 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)
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Source: France 24
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