France’s Budget Plan for 2025

PARIS (Reuters) – France’s new government aims to squeeze around 50 billion euros ($52 billion) in savings from the 2025 budget, according to Finance Minister Eric Lombard on Monday. This target is lower than that of his predecessor.

Lombard emphasized the need for an easier belt-tightening approach to support economic growth, stating that the upcoming budget bill would aim for a deficit between 5.0% and 5.5% of GDP.

The previous government, which collapsed last month after opposition parties rejected its 2025 budget plan, sought to reduce the deficit from 6.1% in 2024 to 5% this year.

“We have to support the economy. I’m considering companies lacking confidence; we can’t hold growth back,” Lombard told France Inter radio.

Lombard has initiated discussions with opposition parties to gain support before proposing the new budget bill, hoping to avoid a no-confidence vote like that which recently brought down the previous government.

The inability to pass a 2025 budget has unsettled investors and ratings agencies, and the challenge of achieving necessary savings has proven difficult in a deeply fragmented parliament. The previous government, led by Michel Barnier, aimed for savings of 60 billion euros.

To pass its budget, the new government will likely need backing particularly from the Socialists, who advocate for higher taxes on the wealthy and large corporations.

Lombard noted that the new bill would not introduce new taxes beyond those proposed in the failed budget, but it would revise a planned extra tax on France’s largest companies to raise about 8 billion euros, along with a tax increase on wealthier taxpayers.

He expressed willingness to reconsider the 30% flat tax on capital gains and income, introduced by President Emmanuel Macron in 2018, to enhance France’s appeal to global investors. This flat tax has drawn criticism, labeling Macron as a president for the wealthy.

($1 = 0.9678 euros)