France's New Fiscal Strategy: A Softer Approach to Budget Cuts

France's new government is taking a softer approach to budget cuts, lowering the target to 32 billion euros. The amended bill aims to pass both houses by month's end. Meanwhile, 21 billion euros is expected from tackling tax avoidance, as the government seeks to meet its deficit reduction goal.

The French government, under new leadership, has announced a reduction in its budget cut target, now aiming for 32 billion euros instead of the previous administration's 40 billion. The move is part of efforts to finalize the 2025 budget by the month's end, an ambition spurred by the bill's previous stalling in the Senate. The previous government's more aggressive cuts led to its ousting, demonstrating a legislative pushback against fiscal tightening perceived as excessive.

Budget Minister Amelie de Montchalin emphasized the necessity of the cuts, framing them as essential to prevent broader tax hikes on the middle and lower-income groups. At the same time, the government anticipates an additional 21 billion euros by cracking down on tax avoidance, marking the largest spending reduction attempt in decades.

Prime Minister Francois Bayrou has articulated a revised deficit target of 5.4% of GDP, slightly higher than ex-Prime Minister Michel Barnier's 5% goal. This move is seen as addressing the political backlash that previously resulted in the government's collapse. Bayrou is also attempting to garner support from leftist lawmakers by revisiting contentious pension reforms, which is crucial to passing the upcoming budget.

(With inputs from agencies.)