French Premier Warns on Budget as Talks to Form Government Drag
(Bloomberg) -- French Prime Minister Michel Barnier issued a warning over the country’s public finances as disagreements between rival parties on tax and spending further complicate his task of forming a government.
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“The country’s budgetary situation is very serious,” he said in a statement provided by his office on Wednesday. “I have asked for all the information I need to assess its exact reality.”
Nearly two weeks after being named prime minister, Barnier has still not managed to put together a new administration that can reflect the different priorities of a deeply divided lower house of parliament and address France’s widening budget deficit.
He has said he will focus on containing debt and is open to greater tax fairness. But indications that would translate into a bigger burden on taxpayers have angered lawmakers from Emmanuel Macron’s bloc in parliament who are reluctant to break with the president’s mantra of no increases.
Outgoing Interior Minister Gerald Darmanin said on France 2 television on Wednesday that it would be “out of the question” for the centrist group to join a government that raises taxes.
Barnier’s conservative Republicans party has few seats in a parliament that is split between three large blocs: the leftist New Popular Front alliance, Macron’s centrists and Marine Le Pen’s National Rally. To avoid being toppled through no-confidence votes, the new prime minister must garner some support across party lines, although the left has already pledged outright opposition.
In a sign of the complexity of the talks, Barnier postponed a meeting planned for later on Wednesday with representatives of Macron’s group including former Prime Minister Gabriel Attal.
“I am very focused on forming a balanced government in the near future, to deal methodically and seriously with the challenges facing our country,” Barnier said in the statement. “My aim is to get back on the path to growth and raise the standard of living of the French people at a time when we are already the country with the highest tax burden.”
Under Pressure
Barnier is under pressure to reach a decision quickly to meet deadlines for presenting a 2025 budget. The outgoing government has said efforts to reduce the deficit will drift off course without more action to curtail spending.
Bank of France Governor Francois Villeroy de Galhau has said the caretaker administration’s plan of bringing the budget deficit within the European Union limit of 3% of economic output by 2027 is no longer realistic and would hurt growth too much. He has said France should set a new five-year timeline, relying mainly on spending cuts but also taxation.
“It will be necessary to lift the taboo on raising taxes, without hitting the middle classes and small businesses, if possible,” he said in an interview with Le Parisien newspaper.
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