Barnier's plan to reduce France's budget deficit by 2025

Barnier’s approach comes in the wake of a hung parliament, complicating his efforts to push through reforms amidst parliamentary fragmentation. He has proposed raising between 15 to 18 billion euros in taxes, including an increase in corporate taxes and additional levies on energy companies and share buybacks. Despite his assurances that these tax increases would be temporary, there are concerns that they may become permanent. Barnier’s government is also tasked with finalizing the 2025 budget within a tight timeline, as it must be handed to lawmakers by mid-October. The political landscape remains challenging, with opposition from both the far-right National Rally and left-wing parties, raising questions about the viability of his reform agenda.

Key Components of Barnier’s Plan

• Targeted Tax Increases: Barnier plans to implement temporary tax hikes on major corporations and the wealthiest citizens, aiming to generate significant revenue to address the budget shortfall.

• Public Spending Cuts: Alongside tax increases, substantial cuts to public spending are necessary to balance the budget and restore fiscal credibility within the EU.

• Timeline and Challenges: The goal is to reduce the deficit to 5% by the end of 2025, but Barnier has indicated that the timeline for reaching the EU’s 3% deficit target may be extended to 2029. The political dynamics in parliament could pose significant hurdles in achieving these fiscal objectives.

Political Landscape

Barnier’s government, formed after a snap election, is characterized by a lack of an absolute majority, which complicates the passage of his budgetary reforms. The opposition, particularly from left-wing factions and the National Rally, is expected to challenge his proposals vigorously. Barnier’s capacity to navigate this fragmented political environment will be crucial for the success of his fiscal strategy and the stability of his administration.