French PM Barnier unveils austerity budget for 2025 €60 billion in spending cuts and tax hikes

The French government has introduced a bold 2025 budget, targeting €60 billion in spending cuts and tax hikes as it grapples with a mounting deficit.

Prime Minister Michel Barnier, facing a fragile minority government, has prioritized addressing France's "colossal" public debt, despite the political risks involved, Caliber.Az reports citing foreign media sources.

He warned that failing to act would compromise the country’s economic future, declaring, "We cannot sacrifice the future of our children or continue to write bad checks that will fall on them."

The proposed budget introduces an "exceptional" tax on 440 large corporations with revenues exceeding €1 billion, expected to raise €12 billion over two years, with additional taxes on share buybacks. State-owned electricity giant EDF will also contribute through a special dividend, raising €13.6 billion in total from corporate tax measures. These moves mark a significant departure from President Emmanuel Macron's economic policies since 2017, which focused on tax cuts and labor reforms to drive growth.

Barnier's first major test will be pushing the budget through France's fragmented National Assembly. Few believe the budget can pass without invoking a constitutional clause to override parliament, a move that risks triggering a no-confidence vote. Barnier must also calm investor concerns, as French borrowing costs now exceed not only Germany’s but also Spain’s, and face pressure from the EU to address the deficit, which has ballooned to over 6% of GDP.

Two-thirds of the €60 billion effort will come from spending cuts, affecting healthcare, unemployment, and public sector jobs, while the remaining third will be generated through tax hikes. However, a government advisory body estimates that 70% of the measures will come from taxes, highlighting a political divide within Barnier’s coalition. His conservative Les Républicains party favors more spending cuts, while Macron's centrist allies oppose significant tax increases.

Barnier’s proposal to delay inflation-adjusted pension increases for retirees by six months—a move expected to save €3.6 billion—has sparked fierce opposition, particularly from Marine Le Pen's Rassemblement National (RN), a key political force in any potential no-confidence vote. The deficit is expected to decrease to 5% of GDP by the end of 2025, though public spending will continue to rise as the cuts and taxes will merely slow the rate of increase. France’s debt currently stands at 110% of GDP, trailing only Greece and Italy within the EU.

Barnier's budget represents a risky departure from France's long-standing welfare-heavy policies, as the government faces the challenge of balancing the nation's deficit while navigating the complex political landscape.

By Tamilla Hasanova