French Government Faces Budgetary Battle Amid Spending Cuts and Tax Hikes

Prime Minister Michel Barnier announced significant public spending cuts and targeted tax hikes to address France's budget deficit. He emphasized the need for financial reforms to maintain credibility with the EU and financial markets. Despite political challenges and opposition, Barnier vowed to push through the critical changes.

Prime Minister Michel Barnier announced on Tuesday significant public spending cuts and targeted tax hikes for France's largest companies and wealthiest individuals. The move, he said, is necessary to narrow a gaping budget deficit. Barnier, who was appointed last month, faces the monumental task of addressing the public financial crisis amid political fragmentation and infighting within his minority government.

France's standing with its European Union partners and its credibility in financial markets are at risk following a surge in borrowing costs. "The real sword of Damocles hanging over us is our colossal financial debt," Barnier, a 73-year-old former minister and EU commissioner, stated, ignoring heckles from the hard-left France Unbowed. He added that the country's deficit was weakening its position in Europe.

Tax increases will be targeted and temporary, Barnier noted, although he did not provide specific details. The dismal state of public finances, he emphasized, gives the nation "no other choice." According to Le Parisien newspaper, proposed tax hikes could range from 15 to 18 billion euros, affecting corporate and energy sectors. Though best known for his role as the EU's Brexit negotiator, Barnier aims to reduce the budget deficit from an estimated 6% this year to 5% by 2025, delaying the euro zone's 3% deficit goal target to 2029 from 2027.

(With inputs from agencies.)