French Finance Minister Antoine Armand stated on Saturday that the 2025 budget could still be improved but stopped short of offering significant concessions in the face of mounting pressure from the far-right National Rally (RN). The standoff threatens Prime Minister Michel Barnier’s fragile minority government as the RN demands further changes.
France’s budget deficit has ballooned this year, placing its government bonds under pressure. However, ratings agency Standard & Poor’s provided temporary relief on Friday by maintaining the country’s credit rating. Despite this, the government faces political turmoil, with both the far left and far right signaling their willingness to bring Barnier’s administration down over the proposed budget.
The contentious budget aims to slash €60 billion ($64 billion) through tax hikes and spending cuts. RN leader Marine Le Pen, whose tacit support is critical for Barnier’s survival, has set a Monday deadline for her demands, which include adjustments to pensions and medication reimbursements.
“This government is open to dialogue, respectful of differing views, and committed to improving the budget,” Armand told reporters. However, he emphasized that the real ultimatum was ensuring France had a functioning budget.
Concessions and Demands
The government has already made concessions, including dropping a proposed electricity tax increase, as demanded by the RN. However, the far-right party insists on further measures, such as tying pension hikes to inflation—a step the government planned to delay to curb costs. Additionally, the RN is pushing for the reversal of medication reimbursement cuts, higher taxes on share buybacks, and reductions in France’s contribution to the European Union’s budget.
RN lawmaker Jean-Philippe Tanguy warned on Saturday that if the social security bill presented on Monday does not include the demanded changes, the party would support a no-confidence motion.
Political and Economic Risks
The government may have to resort to a constitutional provision to force the budget through parliament, a move that would automatically trigger a no-confidence vote. The RN has hinted it will base its decision on the government’s willingness to compromise on key issues.
Meanwhile, the budget’s goal of reducing the deficit to 5% of GDP next year, down from over 6% in 2023, is increasingly uncertain due to costly concessions. Standard & Poor’s forecasts a deficit of 5.3% for 2024 and warned of doubts about France’s ability to meet the EU-mandated 3% target by 2029.
The standoff has rattled financial markets, with French debt and stocks under pressure. The risk premium on French government bonds has reached its highest level in over a decade, highlighting investor concerns over political instability.
“Political instability and the absence of a budget would lead to a sharp rise in the financing costs of French debt,” Armand cautioned.