Facing far-right ultimatum, French finance minister says budget can still be improved

7:14 am Saturday, November 30th, 2024

By Leigh Thomas

PARIS (Reuters) -French Finance Minister Antoine Armand said on Saturday that the 2025 budget could still be improved, but stopped short of giving ground in a standoff with the far right over new concessions.

France’s budget deficit has spiralled out of control this year, pressuring French government bonds, although ratings agency Standard & Poor’s gave Prime Minister Michel Barnier’s fragile minority government a rare reprieve late on Friday by leaving its rating steady.

Any relief is likely to prove short-lived with both the left and far right threatening to bring Barnier’s government down over the budget, which seeks to squeeze 60 billion euros ($64 billion) in savings through tax hikes and spending cuts.

Marine Le Pen’s far right National Rally (RN), whose tacit support Barnier needs to survive a likely no confidence motion, has given him until Monday to accede to her demands to make further changes to the budget.

“This government, under his authority, is willing to listen, to have a dialog, to be respectful, to improve this budget,” Armand told journalists.

Asked about the showdown with Le Pen, he said: “The only ultimatum really facing the French is that our country gets a budget.”

On Thursday, Barnier dropped plans to raise electricity taxes in the budget as the RN had demanded, but it is keeping pressure on the government to hike pensions in line with inflation where the government had hoped to postpone an increase to save money.

RN lawmaker Jean-Philippe Tanguy told Les Echos newspaper on Saturday if the bill is not modified the party would back a no-confidence motion.

The test could come as soon as Monday if Barnier’s government has to use an aggressive constitutional measure to ram the social security financing legislation through parliament, which will trigger a no-confidence motion.

“The government doesn’t seem to want to move (on pensions). We are waiting to see the social security bill on Monday to draw conclusions,” Tanguy said.

The RN also wants planned cuts to medication reimbursements by the state to be axed, increased taxes on share buybacks and financial transactions as well as a cut in France’s contribution to the European Union’s budget.

The government’s aim to cut the budget deficit next year to 5% of economic output from over 6% this year is already sliding in the face of costly concessions made to the RN and other parties.

Standard & Poor’s said that it expected the deficit at 5.3% next year and said the outlook was unclear after that whether France could keep reducing the deficit to an EU limit of 3% as currently planned by 2029.

As the RN has firmed up its demands, French debt and stocks have come under pressure in recent days, pushing the risk premium on French government bonds to their highest level in over 12 years.

“The absence of a budget (and) political instability would bring a sudden and substantial increase in the financing costs of French debt,” Armand said.

($1 = 0.9456 euros)

(Reporting by Leigh Thomas; Editing by Toby Chopra)