France’s new center-right government, led by Prime Minister Michel Barnier, has introduced an austerity budget to tackle high public debt.
According to a statement issued by the government after a cabinet meeting on Thursday, the plan aims to save and generate a further €60 billion ($65.5 billion) next year.
It is expected that two-thirds of this amount will come from spending cuts, while the remaining third will come from tax increases that will target high-income businesses and high-income households.
Due to an excessively high deficit, the European Commission is conducting a deficit procedure against France. France must submit a consolidation plan to Brussels by the end of October.
For the current year, France expects a budget deficit of 6.1%, which should be reduced to 5% by 2025 and back below the European limit of 3% by 2029.
The austerity policy is meeting resistance in parliament. Even before its presentation, there was a barrage of criticism from left-wing and right-wing nationalists.
There are also reservations within the government itself, with members dissatisfied with the cuts. There was also criticism from the High Council for Public Finance, which assessed the government’s sustainability plans. The underlying growth prospects were assessed as too optimistic by the board.
Since the government does not have a majority in parliament, it would have to either pass a heavily amended budget or implement its version using a special article in the constitution, bypassing lawmakers.
Shortly after taking office, budget negotiations could become a power struggle for the government. Street protests cannot be ruled out either.
