France plans eye-watering €40B in budget cuts for 2025

PARIS — France’s new government is planning to cut spending by approximately €40 billion and raise taxes to bring in another €20 billion next year in an effort to reduce the country’s massive public debt, government officials said Wednesday.

Paris hopes this budgetary adjustment of €60 billion will reassure Brussels and financial markets that France is serious about cutting its massive deficit, which is expected to reach 6.1 percent of gross domestic product this year. But draconian cuts could impact businesses and spark widespread protests in France, where people have taken to the streets for less.

While there are no details on the proposed spending cuts, government officials — who spoke on the condition of anonymity in line with standard practice in France — told reporters in a briefing that they are planning to cut approximately €20 billion from ministerial budgets; delay adjusting pension payments for inflation until July; and make spending in the healthcare sector more efficient.

In terms of bringing in revenue, Barnier is planning to hike taxes on big corporations, share buybacks and plane tickets. He’s also expected to ask France’s wealthiest taxpayers for a “special contribution.” Those measures, government officials said, are expected to bring in €20 billion next year. They are already facing criticism from French President Emmanuel Macron’s allies.

Barnier’s government is planning to finalize its budget for next year on Oct. 10.

“It looks as if France is heading for fiscal tightening comparable in scale to the austerity implemented in many countries during the eurozone crisis,” Andrew Kenningham, chief Europe economist at Capital Economics, said. “This is likely to significantly dampen economic activity.”

Since Barnier’s appointment as premier in early September, he has made it clear that bringing down France’s €3 trillion debt is his top priority. The prime minister has repeatedly promised to be honest with the French about the state of the country’s finances, including during his first address to parliament on Tuesday. In that speech, Barnier announced that France will need until 2029 to comply with European Union spending rules requiring a deficit below 3 percent of GDP. The previous government had promised to reach the deficit goal in 2027, a deadline many experts saw as unrealistic.

Barnier likened the national debt to a sword of Damocles hanging over the French “which, if we’re not careful, will place our country on the brink of the abyss.”

The European Commission last year placed France under a so-called excessive deficit procedure for overspending. Paris has until the end of the month to send Brussels a credible debt-reduction plan. French officials believe that the cuts announced Wednesday will sufficiently assure European negotiators.

A EU diplomat said that while it was “encouraging” to see France getting serious about reducing its deficit, “seeing is believing.”

“Plans and promises alone don’t bring down the deficit,” the diplomat, who requested anonymity to speak candidly, said. “This will be a litmus test for the Commission’s credibility. We expect it to take it’s role as guardian of the fiscal rules seriously when assessing the French plans.”

Carlo Martuscelli contributed reporting.