The French Center Plays Brinkmanship With Fiscal Crisis

"French Prime Minister François Bayrou is backed into a corner, without a majority in parliament and facing stiff opposition to his economic program. In a risky opening move of the autumn budget season, the premier announced last week that he will wager the survival of his government by calling a confidence vote on September 8. It's a long-shot attempt to regain the initiative in France's hung parliament as Bayrou seeks support for a deficit-slashing 2026 budget."

"In the prime minister's telling, his government is the last rampart of stability in a country hurtling toward fiscal crisis. Speaking to allies in a dramatic August 25 address, Bayrou laid out his case, asking, "is there or is there not a sense of national urgency for rebalancing our public finances and averting the scourge of massive indebtedness while there's still time?""

"France's deficit as a percentage of GDP is expected to total 5.4 percent in 2025, well above the European Union's official three percent cap. The budget shortfall is the result of the large Covid and inflation-crisis spending programs of the early 2020s, as well as the drop in revenues caused by the pro-business tax cuts enacted during President Emmanuel Macron's tenure since 2017. The cost of interest payments on French debt is slated to swell to €55 billion in 2025-double the rate in 2020."

Prime Minister François Bayrou lacks a parliamentary majority and has scheduled a confidence vote on September 8 to secure backing for a deficit-cutting 2026 budget. Bayrou portrays the government as the final defense against a looming fiscal crisis and invokes urgent public-finance rebalancing. France's deficit is projected at 5.4 percent of GDP in 2025, above the EU three percent ceiling, driven by Covid and inflation-era spending and revenue losses from pro-business tax cuts. Interest costs will rise to €55 billion in 2025. The government proposes about €44 billion in 2026 savings through public-service cuts, welfare freezes, and higher payroll receipts, aiming for 4.6 percent in 2026 and 3 percent by 2029.

Read at The Nation