Star Metro - French PM launches budget plan in test for new govt

Barnier, who has been in the job only since last month following an inconclusive general election, earlier this week survived a no-confidence vote brought by leftist deputies who feel they should have been appointed to govern by President Emmanuel Macron instead of the conservative premier.

But despite handily seeing off the opposition in that vote, Barnier remains hostage to the possibility of left-wing and far-right deputies teaming up in the future to force the government to step down in another vote of no confidence.

France's annual budget debate has often triggered no-confidence motions and Barnier's plan sparked vocal opposition even before all the details were known.

"This is the most violent austerity plan that this country has ever seen," said Manuel Bompard, a lawmaker for the hard-left LFI party. "It will cause French people to suffer."

- 'Our children's future' -

The government, under pressure from the European Commission to bring France's sprawling deficits and growing debt under control, said it will improve its budgetary position by 60 billion euros ($66 billion).

Forty billion euros of that will come from spending cuts along with 20 billion from tax increases on high earners and some 400 large companies.

The budget also calls for a reduction of France's civil service payroll, as well as a freeze on regular increases in pensions.

"We mustn't sacrifice our children's future" by writing "bad checks" or "blank checks", Barnier said Thursday, insisting that the efforts required were "fair" and "balanced".

Budget Minister Laurent Saint-Martin added: "We cannot wait. We must make brave choices now to avoid painful choices later."

Barnier has argued that France has little wiggle room left as it risks a downgrade from debt rating agencies, an excessive deficit procedure by the EU Commission and a risk premium on new debt issuance demanded by investors.

"The attractiveness or credibility of the French signature must be preserved," Barnier said.

France already pays a higher debt premium than Spain, and is edging closer to the high-risk yields demanded of Italy and Greece.

- Without a vote? -

Most of the spending cuts focus on direct government spending, followed by social security and public healthcare spending.

France's employers association Medef has already complained of reductions in state help for companies hiring low-wage workers and apprentices, saying "hundreds of thousands of jobs" were at risk.

The government will also charge higher levies on owners of polluting vehicles and on the maritime sector, as well as on the aviation industry although details were still being worked out, it said.

Barnier had promised to spare "the most vulnerable" and "those who work" from higher taxes. The income tax hikes will be limited to the 65,000 highest earners in the country over three years, according to the budget plan.

He hopes to bring France's public-sector deficit to below five percent of gross domestic product (GDP) next year, from an expected 6.1 percent in 2024.

The government hopes that in 2029 it will drop to below three percent, the agreed deficit ceiling for EU members.

France's debt is expected to rise to close to 115 percent of GDP next year, which compares with an EU debt target of 60 percent, and is the highest national debt to GDP ratio among EU countries besides Italy and Greece.

In absolute terms, France's debt stood at over 3.2 trillion euros at the end of June, having risen by about one trillion since Macron took power in 2017.

If the opposition parties in parliament come out against the budget draft law, the government has the option of forcing it through without a vote under Article 49.3 of the French constitution.

But this would open the door to another vote of no confidence, putting Barnier at the mercy of the opposition yet again.

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A.Hill--SMC