Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
France has asked for more time to submit its debt and deficit reduction plans to the European Commission as new Prime Minister Michel Barnier works to put together a government against a backdrop of worsening public finances.
The country’s finance ministry said it had asked Brussels to give it more time putting together the plans, which are due to be submitted on September 20. France would probably send them alongside the draft 2025 budget, due by mid-October, one EU official said.
“Like other member states in this year of transition to the new European budgetary rules, France has asked the commission for such an extension. This aims to ensure consistency between the plan and [France’s] draft finance law for 2025,” the finance ministry said on Sunday.
Last week, outgoing finance minister Bruno Le Maire warned that the country’s public deficit would be higher than expected this year, rising to at least 5.6 per cent of gross domestic product.
“The main risk is linked to an extremely rapid rise in spending by local authorities which alone could affect 2024 accounts by €16bn compared to the 2024-27 stability programme,” his letter to MPs said, in reference to spending plans sent earlier this year to Brussels.
Passing the country’s 2025 budget, which must be presented to parliament for debate at the start of October, will be the first big hurdle facing Barnier’s new government, and one that promises to be highly contentious in a hung parliament sharply divided along ideological lines.
A veteran conservative politician and former Brexit negotiator for the EU, Barnier’s experience as a political dealmaker will be put to the test as he tries to forge a stable government in a highly fractured political landscape.
EU fiscal rules that limit spending to 3 per cent of GDP were suspended during the pandemic but have been reintroduced with new clauses and conditions.
France is one of seven EU member states facing an excessive deficit procedure, launched by the commission in June, a reprimand for breaching bloc rules that limit annual borrowing to 3 per cent of GDP.
The commission will give instructions in the autumn on how to reduce spending once EU countries have submitted their multiannual plans for review. However, France still does not have a new government in place two months after snap elections returned a divided parliament.
In his first interview since being named as PM by Macron this week, Barnier on Friday said he did not want to add the country’s debt. However, he is already facing pressure on spending plans from the different political forces he will need to balance in order to avoid having his government toppled.
“The country can no longer afford to make reckless expenditures in a certain number of areas. I am thinking of immigration, but also of fraud,” said Marine Le Pen, leader of the far-right Rassemblement National, which came second in the July vote, in an interview with La Tribune Dimanche.
The prime minister has been consulting with political leaders over potential ministers, but he will need support from his Les Républicains party, other conservatives and centrist groups, as well as the tacit agreement of the RN not to vote against him, if his coalition is to survive.
“The next budget will undoubtedly be the most delicate of the Fifth Republic,” Pierre Moscovici, head of the national auditor, told Le Parisien at the weekend. “We absolutely must control our debt . . . If this continues, it would result in a massive departure from our commitments and our European partners.”
A commission spokesperson said: “A submission of the plan after September 20 is a possibility foreseen in the rules. Member States can agree with the commission to extend that deadline by a reasonable period. We cannot confirm at this stage whether we have received [France’s] request.”
Additional reporting by Javier Espinoza and Paola Tamma in Brussels
Read the full article here
