France – Bayrou plays for time

In a speech to the National Assembly today, the new French Prime Minister Bayrou outlined the foundation of his planned policy. Unsurprisingly, in addition to immigration, one focus was on restructuring the state finances. After all, France's debt ratio (i.e. its national debt in relation to the country's economic output) is now well over 100%, and the budget deficit last year was probably equivalent to more than 6% of gross domestic product and was therefore twice as high as actually permitted under European rules.

Higher deficit target for 2025 than Barnier

After his predecessor Barnier failed in his attempt to reduce the deficit ratio to 5% with the help of spending cuts and tax increases, Bayrou only wants to reduce it to around 5½% this year, although the government has also revised its growth expectations downwards from 1.1% to 0.9%. However, the government is sticking to the target of reducing the deficit ratio to 3% by 2029. Nevertheless, France's debt ratio would continue to rise in the coming years.

Bayrou did not provide any details on planned measures to reduce the budget deficit. However, he promised to protect companies from an “exponential” increase in their taxes and duties. Instead, he wants to “make life easier” for them. In addition, the cuts to medical care planned by Barnier are not to be pursued any further.

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