Barnier’s conservative government presents its first budget

Fresh from the first motion of censure, Michel Barnier fully enters his first major political battle: the processing of the general budget. The French Prime Minister officially announced the contents of the finance bill this Thursday. From now on it will be debated in the National Assembly, where his party is in minority. A litmus test for the new head of the executive, especially in the context of rising public debt and deficit.

“The real sword of Damocles is not the one that weighs on my government, but the one that weighs on the French: budgetary debt,” Barnier said in his general policy speech last week. Earlier this year, indications began to emerge that the public accounts figures in 2024 would be far from forecasts established by the government. Elisabeth Borne’s executive had set a target of bringing the public deficit to 4.4% of GDP, whereas in recent months there have been estimates that it would reach 6.1%.

As far as public debt is concerned, it reached 3.2 trillion euros at the end of June, a trillion more than when Emmanuel Macron became president in 2017. In recent weeks, Barnier had already announced his intention to present a budget that aims to achieve savings of 60,000 million euros, two thirds of which will come from public spending cuts and the rest from “specific and limited time”. Will come from increase in. Big property and multinational companies.

It remains to be specified how the €40,000 million savings in public expenditure will be distributed. It has been suggested that a large portion – about a third – would come from Social Security and another from canceling various state credits. Furthermore, statements from some ministers give some indication of the areas that will be cut, such as justice and science, which they believe will see their budgets reduced.

Tax on multinationals and the rich

The new French government’s main proposal in terms of taxation is an increase in corporate tax, which Macron had reduced to 25% in 2017, on company profits. The new executive wants to return it to 33.5%, an “extraordinary” contribution that could bring 8,000 million euros to the public coffers in 2025. The government has stressed that this is an effort limited in time and will only affect profitable companies. More than 1,000 million euros.

In addition to large multinationals, the budget establishes an “extraordinary contribution” from the “luckiest” citizens to put France back on track to reduce the public deficit to below 5% in 2025 and to 3% of GDP in 2029. . The new economy minister, Antoine Armand, said this week that this increase in taxation applies only to the richest 0.3%, about 65,000 households.

Other tax measures have been mentioned in general terms without going into details. This is a case of a partial increase in some taxes on electricity and additional taxes on the purchase of vehicles that pollute the most, either because of weight or the type of fuel used. There is also an issue of tightening taxation on Airbnb type vacation rentals.

criticism among colleagues

This tax increase is one of the most sensitive points in the budget discussions that Michel Barnier is having with the rest of the parties. And it has been particularly criticized by leaders of the centre-right coalition, former members of the government, such as Gabriel Attal and Gérald Darmanin. For both Macronists, the increase in taxes on companies represents a step back in the “supply stimulus” policy initiated by Macron seven years ago and, in their opinion, efforts to increase the ability to attract investors to the French economy. Is against.

Paradoxically, a few days earlier, Emmanuel Macron himself had been in favor of extraordinary taxation “for a year” on large companies in a public intervention during an official visit to Berlin.

In any case, the current president of the Together for the Republic group (the party founded by Macron), former Prime Minister Gabriel Attal, presented at a press conference on Wednesday an alternative budget to Michel Barnier, which, in his opinion, “is not “It involves substantial reforms and yes, a lot of taxes.” Instead, Atal advocates reform of the unemployment benefit system.

The French government also plans to freeze pension indexation (to adjust them to the CPI) for six months as a means of achieving additional savings of 4 billion euros. A measure that has caused unrest in Barnier’s party, although for the time being the desire to grow closer to the executive is strong in public statements.

parliamentary debate

However, the parties on which the government coalition rests seem to agree on one point: the need to resort to Article 49.3 of the Constitution to approve the budget if necessary. Presented to the Council of Ministers this Thursday, the bill is transmitted to the Assembly where deputies can debate it until December 21.

The preparation of a finance bill, a highly codified and regulated process in French law, has rarely been as destabilized by the political context as it is this year. Specifically, for the 50 days that elapsed between Atal’s resignation and Macron’s nomination of his successor. For the first time, it has become impossible to maintain the legislative calendar assigned to the bill and the budget prepared by the new executive will reach the National Assembly late.

Although the government says it is ready for talks with MPs, the assembly is divided into three sections and is reluctant to make concessions. As a result, according to Article 49.3, the budget can be approved without voting. In that case, the government does not need the approval of the Assembly, which can only block the legislation with a possible motion of censure, in which the votes of the extreme right would once again be decisive as they were last Tuesday to save Barnier. ,

“At the moment, Michel Barnier is not sending us any positive signal to prevent us from voting on a censure motion after the budget review,” MP Sebastien Chenu, spokesman for Marine Le Pen’s party, said on Wednesday. “There are red lines that are not being respected, among them those that require France to make extra efforts to compensate for the damage caused by the economic policies implemented in recent years.”

left

For their part, the progressive parties of the New Popular Front (NFP) have told the Prime Minister that the measures on taxation of the most privileged do not go far enough and proposed additional efforts such as the establishment of a tax. Climate fate.” for assets worth more than one million euros. However, several French media suggest that the NFP abandoned the initial idea of ​​drawing up an alternative budget, as did Gabriel Atal, due to internal differences, particularly On possible measures to reduce public expenditure.

However, several important members of the Socialist Party have stressed their satisfaction with the first fiscal measures taken by Michel Barnier. These include Carole Delga, president of the Occitania region, and Rafael Glucksmann, head of the socialist list in the last European elections. “They are a step into the door (of fair taxation) that Macron locked with three keys,” the MEP said this week.

On the other hand, in recent days, some French media have suggested that the figure given by Barnier does not necessarily correspond to reality. A document sent by the government to the High Council of Public Finance, disclosed by the Context website, shows that in reality the adjustment could be less than the 60,000 euros announced and that it would rest equally between taxation and cuts. .