French Budget to Face Lawmaker Showdown After Latest Concessions
(Bloomberg) -- French lawmakers reached a deal on a version of the 2025 budget on Friday, paving the way for a showdown in parliament next week that could topple the government.
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A group of 14 senators and members of the National Assembly worked on the bill to reflect concessions made by Prime Minister Francois Bayrou’s administration. The text will now go to the lower house on Monday, where the premier will need to get the legislation adopted with a constitutional tool that exposes him to no-confidence votes.
“I welcome the agreement in the joint committee on the finance bill,” Finance Minister Eric Lombard said in a post on X. “Lawmakers and senators agreed on a compromise text. This is an important step in providing us with a budget and allowing our country to move forward.”
The deal at the conference committee brings France closer to resolving a crisis over its public finances that toppled Michel Barnier’s government in December and left the country relying on stopgap legislation to avoid a shutdown. The uncertainty combined with gaping budget deficits has sparked market selloffs, driving up France’s borrowing costs compared with peers.
French debt rallied on the news of Friday’s deal, leading gains across euro-area government bonds. The 10-year yield fell seven basis points to 3.20%.
That tightened the premium over Germany — a closely watched gauge of risk — by two basis points to 73 basis points. The spread has been narrowing since a recent peak of 86 basis points on Jan. 13.
Tough Hurdles
The French government still has difficult hurdles to clear before securing fiscal certainty. Without a majority in the National Assembly, Bayrou will have to deploy article 49.3 of the French constitution to adopt the bill without a vote on Monday, exposing the government to a no-confidence motion.
The far left has already pledged to propose a censure ballot that, if backed by a majority as early as Wednesday, would force the prime minister to resign and see the finance bill rejected.
Barnier fell in a similar scenario when the entire left bloc and Marine Le Pen’s far right joined forces.
To avoid the same fate, Bayrou’s government has sought to strike a deal with the Socialists. Their lawmakers on the conference committee voted against the latest version of the budget but said they won a series of concessions including preserving spending for health, education and pensions.
The party’s leader in the National Assembly, Boris Vallaud, who participated in the negotiations, said he would report back to fellow lawmakers before deciding on what course of action to take.
“It wasn’t our budget, we are in opposition and have shown this,” he said. “But we never gave up on the aim of being useful for French people.”
Le Pen’s National Rally also claimed some victories in the talks, even if it remains opposed to pricing mechanisms for nuclear power.
“We have maintained all our red lines,” Jean-Philippe Tanguy, a lawmaker from the far right-party, told reporters.
Even if the government survives next week’s no-confidence vote it will likely face more over the social security bills linked to main budget when they are presented later in February.
--With assistance from Greg Ritchie.
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