French Prime Minister Barnier Proposes Tax Rises and Budget Cuts to Decrease Deficit
Since his appointment, Prime Minister Michel Barnier has prioritized pursuing policies to reduce France’s massive debt, including tax hikes and budget reductions (Free Malaysia Today)
French Prime Minister Michel Barnier announced plans to reduce France’s deficit through targeted tax rises and budget cuts on October 1. Amid political instability, France faces a financial crisis, with domestic and international stakeholders pressuring the country to reduce its debt.
France missed the European Union’s September 20 deadline for submitting a financial plan to reduce its budget deficit to Brussels. From 2017 to 2024, French debt rose to a staggering €3.2 trillion from €2.3 trillion, a historic high with national debt equaling 112 percent of the European country’s GDP. For reference, EU rules state that members should maintain a debt level of less than 60 percent of their GDP. The French deficit now accounts for 5.5 percent of the country’s economic output, significantly higher than the EU ceiling of 3 percent. The deficit is expected to climb to 6.1 percent by the end of 2024.
Since becoming Prime Minister in September, Barnier has prioritized efforts to reduce the ‘colossal’ French debt, attempting to alleviate the deficit by €60 billion: €40 billion from budget cuts and €20 billion from tax hikes on large corporations. Barnier has yet to disclose exact details regarding these policies.
Barnier’s plans significantly split from French President Emmanuel Macron’s strong opposition to tax hikes. Macron’s critics have long decried the president’s economic policies that benefit the rich, by decreasing wealth and investment taxes. Despite economists’ findings that his policies have increased income inequality in France, Macron has maintained that his tax cuts encourage economic investment by the rich.
Former Prime Minister Gabriel Attal criticized the move by Barnier, saying that this would push corporations to leave France. Attal said, “Even by targeting only very large companies, you can put millions of jobs and thousands of subcontractors in danger.”
Since becoming Prime Minister, the center-right Barnier has diverted from Macron’s centrist platform. Currently, the French National Assembly is heavily fragmented, with significant far-right, centrist, and far-left coalitions. No matter what Barnier proposes to fix France’s economic troubles, his minority government will likely face trouble passing his budgetary plans through the National Assembly.
To increase support for his policies, Barnier has clarified that he will not raise taxes on all French citizens, especially not on the middle and lower classes, but has stated that it is necessary to raise taxes on bigger corporations. Barnier has also asked the wealthiest French individuals for a “special contribution” to the country.
France received an extended deadline for its fiscal plans, and must submit a 2025 budget with a plan to reduce debt to the EU by October 15 France must also submit a seven-year plan to reduce its deficit by October 31 in accordance with EU requirements. Barnier must move quickly yet delicately as he tries to improve France’s economic outlook and pass his budget through the National Assembly before the mid-October deadline.