Macron Highlights Budget Challenges Ahead of EU Summit

(Bloomberg) -- French President Emmanuel Macron is ramping up pressure on his government to find budget savings at the same time as funding aid to Ukraine, building new nuclear reactors and seeking to make his country friendlier for business.

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“We must be responsible when it comes to public finances,” he told reporters Thursday before a conference about nuclear power and a European Union summit in Brussels. “We must win the battle of re-industrialization, full employment and climate transition.” He reiterated a costly pledge to build new reactors.

The government has already said that last year’s deficit will be much wider than a target of 4.9%, and is still looking into how to fund a pledge to help Ukraine militarily with as much as €3 billion ($3.3 billion) this year.

EU leaders were due to discuss in Brussels ways to fund Ukraine, including so-called eurobonds for defense, which could involve joint debt. An official in Macron’s office told reporters during a briefing ahead of the summit that there should be no limits on what sources of financing should be considered, adding that eurobonds should be examined.

The time-line is tricky for Macron. Marine Le Pen’s far-right National Rally is expected to make a strong showing in European Parliament elections in June. Macron has yet to detail the labor market reform that he said would be unveiled in the spring, and that Le Pen has already attacked. She’s also published an op-ed in business newspaper Les Echos slamming Macron for what she described as careless handling of public finances.

Last month, the French government blamed geopolitics and a slowdown in China and Germany when it lowered its growth forecast for this year to 1% from 1.4%, and said it would need to urgently cut €10 billion in planned spending by the central state this year.

Revised Budget

Lawmakers of Macron’s party have also been working on a revised budget bill for this July and the government has yet to confirm whether it will update its 2024 budget. Macron expressed his reluctance on the issue over a late-night dinner Wednesday with officials from his coalition, according to a person familiar with the discussion who spoke on condition of anonymity.

Finance Minister Bruno Le Maire will meet next week with lawmakers sitting in finance committees to discuss the situation. The government has said it will likely have to find more than €20 billion of savings next year, up from the latest prediction of more than €12 billion.

France’s debt-to-GDP ratio stood at around 112% at the end of last year. Fitch Ratings and Moody’s are set to update their ratings on France’s ability to repay its debt on April 26. Government members including Le Maire have repeatedly excluded raising taxes, insisting on the need to attract businesses and wealthy individuals to France.

Western allies are struggling to get funding to Kyiv at a critical moment in the war, as Ukrainian troops face artillery shortages and as Russia has made advances in the east. Also on the agenda for the Brussels summit is how to use profits from the frozen Russian assets to help Ukraine.

--With assistance from William Horobin and Alan Katz.

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