French 2025 budget targets $52 billion in savings, says FM

France’s new government aims to squeeze around 50 billion euros ($52 billion) in savings out of the 2025 budget, Finance Minister Eric Lombard said on Monday, setting a lower target than his predecessor.

Lombard said that an easier belt-tightening effort was necessary in order to preserve economic growth, adding the budget bill currently being drafted would target a deficit in a range of 5.0 per cent to 5.5per cent of gross domestic product (GDP).

The previous government, which collapsed last month after opposition parties rejected part of its 2025 budget, had hoped to reduce the deficit to 5 per cent this year from 6.1 per cent in 2024.

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

Lombard began consultations with opposition parties on Monday in an effort to preemptively win support before proposing the new budget bill in hope of avoiding a no-confidence vote like the one that brought down the previous government in early December amid a backlash against its belt-tightening proposals.

France’s failure to pass a 2025 budget has spooked investors and ratings agencies, but the savings needed to get France’s public finances in line have proven too much for lawmakers in the deeply divided parliament. The previous government headed by Michel Barnier had targeted savings totalling 60 billion euros.

To pass its budget, the new government will likely need support in particular from the Socialists, who have been pushing for higher taxes on the wealthy and on big companies.

Lombard said the new bill would not create new taxes that were not already in the failed budget but that it would rework a planned additional tax on France’s biggest companies with the aim of bringing in about 8 billion euros as well as a tax hike on the wealthiest taxpayers.

He added he was open to increasing a 30 per cent flat tax on capital gains and income introduced by President Emmanuel Macron in 2018 to make France more attractive to global investors. The flat tax spurred criticism of Macron as a president for the rich.

Lombard added the budget situation was “serious” and the government now targeted a 2025 deficit in a range of 5 per cent to 5.5 per cent of gross domestic product (GDP), which would be a drop from a deficit of “probably” around 6.1 per cent in 2024.

Lombard, previously head of Caisse des Depots, the investment arm of the French government, is tasked with steering through parliament a budget after the previous government lost a no-confidence vote in early December amid a backlash against its belt-tightening proposals.

France’s failure to pass a 2025 budget has spooked investors and ratings agencies, but the savings needed to get France’s public finances in line have proven too much for lawmakers in the deeply divided parliament. The previous government headed by Michel Barnier eyed 60 billion euros in savings.

Lombard also told France Inter radio that the budget deficit would “probably” be around 6.1 per cent in 2024.

France is hoping to get a budget deal done next month, said budget minister Amelie de Montchalin on Monday, who also reiterated she reckoned the government could find majority backing in parliament for the budget.

Opposition from both far-right and far-left parties to a previous budget resulted in the resignation of former prime minister Michel Barnier, who was replaced by Francois Bayrou.

“We are targeting having a budget during the month of February, so that at the very latest by the end of February French people can get out of this uncertainty and deadlock, so that people such as the farmers and others can have more clarity,” Montchalin told France 2 TV. France’s budget deficit for 2025 “will not be much above 5 per cent,” the country’s budget minister Amelie de Montchalin reaffirmed in an interview published on Sunday with Le Parisien paper.

Last month, French Finance Minister Eric Lombard had also said France’s delayed 2025 budget bill would target a deficit of “slightly above 5 per cent”.

Reducing France’s deficit, which has consistently been above limits set by the European Union, has been earmarked as a priority for Prime Minister Francois Bayrou, as it was for his predecessor Michel Barnier, who was ousted in December. However, Bayrou - similar to Barnier - faces challenges over finding ways to cut public spending amid opposition from both far-right and far-left political parties.

France’s 2024 deficit is expected to stand at above 6 per cent of gross domestic product (GDP).