France's Budget Battle: Tax Hikes and Spending Cuts to Narrow Deficit

France's government plans targeted tax increases and spending cuts to reduce its significant budget deficit. Prime Minister Michel Barnier aims to boost tax revenues by billions of euros. The challenge includes parliamentary fragmentation and infighting, with France's credibility in EU and financial markets at stake.

France's government announced on Tuesday that targeted tax rises and spending cuts will be necessary to reduce the country's significant budget deficit. Prime Minister Michel Barnier is expected to outline these plans, aimed at increasing tax revenues by billions of euros, in a parliament speech.

Barnier, who was appointed last month, faces the challenge of addressing a major gap in public finances amidst a fragmented parliament and internal government disputes. This comes at a critical time, as France's borrowing costs have increased, putting its credibility with European Union partners and financial markets at risk.

Government spokeswoman Maud Bregeon stated that reducing public spending will be a significant part of the solution, with targeted, temporary tax efforts also being considered. Reports indicate potential tax hikes of 15 to 18 billion euros, focusing on corporations, energy companies, and top earners.

Additionally, French media suggested that Barnier might extend the deadline for meeting the euro zone's common 3% deficit goal to 2029. Budget minister Laurent Saint-Martin mentioned that this year's budget deficit could surpass 6% of economic output.

Barnier's fragile minority government, despite opposition from various sides, might persist longer than anticipated, according to analysts. However, passing the 2025 budget will be a significant test for the administration.

(With inputs from agencies.)