Barnier’s plan to save France dismissed as Left-wing

Prime minister’s proposed taxes on businesses, wealthy citizens and luxury transport risk making country uncompetitive, critics warn

Michel Barnier faces claims of dressing up “Left-wing” tax hikes as “austerity” in France’s budget aimed at slashing its “colossal” debt burden.
Details of the upcoming budget came as the French prime minister’s fate hangs in the balance in a hostile parliament.
The 73-year-old leads a conservative-centrist coalition in semi-opposition to President Emmanuel Macron, and has promised to stem state profligacy that has shaken market confidence in the eurozone’s second-largest economy and seen borrowing costs approach those of Greece and Italy.
He is due to present the 2025 budget to Mr Macron and then parliament, where he faces a potential “kiss of death” from Marine Le Pen’s National Rally, which could bring his government down at any moment by joining the opposition Left in a no-confidence vote. On Sunday, Ms Le Pen’s party was reportedly preparing an “alternative” budget.
Mr Barnier warned last week that ballooning debt after seven years of Macron rule and a “whatever it costs” spending spree during the Covid-19 pandemic and living costs crisis sparked by the Russia-Ukraine war had become the “sword of Damocles above our heads”.
The EU’s former Brexit negotiator then announced a bitter pill. The 2025 budget, he said, will save €60 billion by slashing spending by €40bn mainly in central and local government, and introducing some €20bn in new taxes on businesses and the wealthy.
The aim is to cut the budget deficit to about 5 per cent of GDP in 2025, from an expected 6.1 per cent this year. That is still well over the eurozone’s maximum 3 per cent limit, which France now hopes to reach in 2027.
It has been billed as the first austerity plan since Nicolas Sarkozy reined in public spending 13 years ago and on a par with Socialist President François Mitterrand’s famous cost-cutting “U-turn” in 1983 after a ruinous tax-and-spend drive.
“This is the most violent austerity plan that this country has ever seen,” said Manuel Bompard, MP for the hard-Left LFI party. “It will cause French people to suffer,” he added. Jean-Luc Mélénchon, the party’s figurehead, called it “calamitous”.
However, experts at France’s High Council of Public Finance, which answers to the state auditor, suggest Mr Barnier’s supposedly fierce spending reductions were not what they seemed.
According to its analysis, a €42bn “structural effort” is required to hit the 5 per cent deficit target. However, it calculated that of this total, 70 per cent are set to come from increasing taxes, and only 30 per cent from spending cuts – the reverse of what Mr Barnier has claimed.
While the tax hikes appeared clearly set out, it warned that the cuts were “not all documented” and their implementation will be “difficult”.
Hikes include exceptional taxes on large companies (€8.5bn) and individuals with very high incomes (€2bn), a six-month freeze on pensions paid to retirees, a tax on share buybacks and a tougher tax on polluting cars. There will also be new taxes on plane tickets and private jet usage.
France’s overall rate of taxes and social security contributions, which are already the highest in Europe, is set to rise even further to 43.6 per cent of GDP by 2025.
Cuts include reduced reimbursement for medical costs and sick pay. In education, 4,000 teacher jobs are set to be cut next year. Overall, the government is planning to cut a net 2,200 public jobs in 2025.
However many reductions appeared vague, said the Council, and half depend on the social security system and local authorities, over which the government has little or no control. It is by no means certain that public spending will actually fall to 56.3 per cent of GDP, as hoped.
Le Monde wrote: “Despite all appearances, the austerity measures planned by Barnier, who hails from the Right-wing Les Républicains party, almost bear the hallmarks of a Left-wing budget.”
Hauke Siemssen, a rates strategist at Commerzbank AG, told Bloomberg: “I don’t think markets consider this deficit reduction a particularly great achievement.”
Regardless, Mr Barnier faces a minefield in steering the budget through parliament before a vote in November.
Ms Le Pen has said she will not “for the time being” join the Left in a no-confidence vote that would be certain to topple the government.
However, any move to force the budget through by decree rather than a parliamentary vote, as Macron’s administration has done in the past, would see the government evicted.
Voicing his disapproval, pro-Le Pen MP Jean-Philippe Tanguy said the budget provided “no break with the mismanagement of the last 50 years”.
“The effort is very poorly distributed,” he warned, “since at least €7bn is earmarked for the middle and working classes and only €2bn for the most privileged. And that, for us, is unacceptable.”