France pledges to spare middle class after unveiling draconian budget cuts

PARIS — France’s government on Thursday unveiled a detailed budget for 2025 aimed at bringing down the country’s spiraling deficit by enacting €41.3 billion in spending cuts and levying approximately €20 billion in taxes, most of which will affect large companies and wealthy households.
The measures should, French officials said, bring the country’s deficit down to 5 percent of its gross domestic product next year. It’s the first step toward new Prime Minister Michel Barnier’s pledge to bring the deficit below 3 percent of GDP, as required by European Union rules, by 2029. Barnier has vowed to get France’s public finances in order after years of overspending that prompted the European Commission to place Paris under a so-called excessive deficit procedure last year.
The premier’s economy and budget ministers, Antoine Armand and Laurent Saint-Martin, presented the government’s detailed plan at a briefing on Thursday. They asserted that the new taxes and spending cuts will neither hit middle-class households nor kill economic growth.
“These tax measures will not hit the lower incomes, the middle classes and those who work,” Saint-Martin told reporters. “It is a path that rules out any tax bullying or austerity cure. There’s no ambiguity about that. We’re not going to put public finances back on track by destroying growth.”
Among the proposals were higher taxes on the wealthiest 0.3 percent of French taxpayers. Saint-Martin said that measure will only impact around 65,000 households.
But even those who aren’t hit directly by the new special taxes may feel the impact of the budget squeeze.
The government is, for instance, proposing to slash €3.8 billion in healthcare spending and to delay inflation adjustments for pensions until July. New taxes on plane tickets and polluting vehicles will likely be passed on to consumers as well.
Despite the rosy prediction from the government, France’s High Council for Public Finances, an independent watchdog, warned that the strategy unveiled on Thursday was “fragile” and overly optimistic.
Business are worried that the government’s aggressive plans could stymie growth as well, especially a proposed two-year corporate tax hike that will affect around 440 corporations with turnovers above €1 billion. Barnier’s government is also postponing several planned tax reductions for companies, raising an existing tax on electricity production, and introducing a new tax on share buybacks.
“It is a major effort we’re asking for, I’m aware of that, but it’s a necessary and temporary one,” Armand said.
Fabrice Le-Saché, vice-president of France’s powerful MEDEF business lobby, agreed that companies could contribute to France’s budget efforts but said he’s concerned that the tax hikes may end up becoming permanent, as such temporary measures sometimes do.
“It is always a risk, when a tax is introduced, it is there and you never know when it is going to be withdrawn,” Le Saché said.