French Government Shakes Up Budget Team Amid $34 Billion Deficit Challenge

French Prime Minister Michel Barnier has appointed Antoine Armand and Laurent Saint Martin to manage a substantial budget deficit. Their task is to balance the looming deficit, potentially requiring tax hikes and spending cuts. The new appointees will face both internal political pressures and external scrutiny from the EU and global economic bodies.

French Prime Minister Michel Barnier has appointed a relatively unknown duo to tackle the nation's significant budget deficit, emphasizing loyalty over political experience for his new finance and budget ministers.

Ending weeks of speculation, Barnier revealed his choices on Saturday, selecting 33-year-old Antoine Armand for the economy and finance ministry and 39-year-old Laurent Saint Martin as budget minister. Saint Martin will report directly to Barnier, diverging from traditional structures.

The pair faces immense pressure to address a budget deficit nearing 6% of GDP due to tax shortfalls and higher-than-expected spending. Despite their lack of political influence, Armand and Saint Martin are considered low-risk to derail President Emmanuel Macron's legacy of tax cuts and pro-business reforms, provided they can pass the 2025 budget.

"It's a way of keeping policy continuity," said economist Mathieu Plane from the OFCE economics think tank. Both officials are seen as loyal followers of Macron's political line but are relatively inexperienced, with Armand serving as a lawmaker since 2022 and Saint Martin serving just one term.

Uncertainty remains over which of the two will lead the 2025 budget bill through a divided parliament, where opposition parties might challenge the legislation and potentially topple Barnier's government. Traditionally, the finance and economy minister drafts budget legislation, while the budget minister plays a supportive role.

Armand will face the additional burden of justifying France's budget decisions in Brussels and representing the country at international forums such as the G7 and G20, alongside seasoned policymakers like U.S. Treasury Secretary Janet Yellen.

The high-stakes task of finalizing the 2025 budget bill by the October 1 deadline will require Armand and Saint Martin to weigh tax increases and spending cuts carefully to avoid political fallout. While many proposals have been prepared by finance ministry officials, the duo must decide on measures like taxes on energy companies and big corporate share buybacks without triggering backlash.

Extreme right and conservative factions are expected to resist broader tax hikes, shifting the burden to unpopular spending cuts potentially ranging from 20 billion to 30 billion euros ($22-$34 billion), depending on the desired deficit reduction pace.

As Armand and Saint Martin deliberate on fiscal strategies, they will likely face close scrutiny from both Barnier and Macron to ensure the continuity of existing reforms.

(With inputs from agencies.)