Emmanuel Macron’s informal agreement with Marine Le Pen.
Two-thirds spending cuts, one-third tax hikes: that’s the ratio newly appointed Prime Minister Michel Barnier is trying to sell as he maneuvers a stretched 2025 budget through France’s divided parliament. “Our colossal financial debt is a real sword of Damocles over us,” the 73-year-old prime minister said in his first speech to the National Assembly on October 1, hoping to cut the deficit by 60 billion euros next year alone.
Budget tightening has quickly become a dominant theme in French politics, with numerous international and domestic bodies warning the country of a budget deficit. As a percentage of GDP, France’s deficit is likely to rise to more than 6 percent in 2024 as a result of emergency spending measures taken during the Covid-19 and energy crisis, combined with a wave of tax cuts. This summer, the European Commission placed France under the so-called excessive deficit procedure for exceeding the maximum 3 percent debt-to-GDP limit set by the EU treaties.
Barnier and his cabinet are now vowing to return France to that level by 2029, calling for several years of prolonged austerity in a country troubled by already underfunded public services and widening economic inequality. The full outlines of Barnier’s budget have yet to be released, but the tax hikes being considered include temporary levies on top earners (0.3 percent of the population, according to the government’s own estimates) and France’s biggest corporations. However, the main part of the effort is to reduce costs. They can include an immediate freeze on pension payments, an increase in health care co-payments, no replacement for retiring civil servants, and cuts to the ministries of employment and municipalities. The initial budget plan for 2025 is expected to be presented to the cabinet on October 10.
Current issue
The drive to cut budget spending ends the political uncertainty of last summer, when snap parliamentary elections saw the left-wing New People’s Front come out on top. The left-wing alliance, created after the dissolution of the National Assembly by President Emmanuel Macron on June 9, has been guided by a program of redistributing wealth, strengthening public services and public investment in a clean transition. The NFP defied expectations of an imminent victory for Marine Le Pen’s National Unity party to become the largest seat-winner in the lower house, seemingly opening the door to a left-wing government.
Because the alliance was far short of the 289 votes needed for an absolute majority, Macron was not required to agree to the bloc’s election as prime minister. In an effort to keep his pro-business agenda intact, the president was staunchly opposed to the possibility of an NFP government. He rejected alliance candidate Lucy Costes before appointing Barnier, previously the EU’s chief Brexit negotiator, in early September.
For Macron, Barnier’s premiership was the lowest common denominator alternative. A member of the conservative Républicains party, Barnier finds himself at the head of a governing coalition of former enemies that unites parties from Macron’s previous coalition and the center-right opposition. Even combined, Macron’s partners and his new allies the Républicains barely hold more than 200 seats in the National Assembly, ahead of the 193 seats controlled by the NFP.
On Tuesday, October 8, the new prime minister survived a first vote of no confidence, with 142 MPs backing Marine Le Pen and her far-right allies, who decided to support the new government. It was indicative of the shaky road ahead for Barnier, who will need to hold his own coalition and multi-party cabinet together while placating Le Pen.
Even the Prime Minister’s attempts at a modest temporary tax increase have caused tension in the ruling minority coalition. Macron’s allies say the tax hike is a red line, even though the growing budget deficit is largely the result of Macron’s unreasonable tax cuts since 2017. These include a reduction in the super-wealth tax before recovery from real estate portfolios, the creation of a reduced flat tax on capital gains and a reduction in the corporate tax rate from 33.3 percent to 25 percent. As he left office in September, Finance Minister Bruno Le Maire boasted of the €55 billion in overall tax cuts he oversaw, warning that any change would pose a serious threat to business.
The fight, most likely, is nothing more than a struggle for optics between the warring parties, who for a moment find themselves sharing the same cabinet and the ruling coalition. The Republicans, formerly France’s dominant right-wing party, have been at loggerheads over taxation for years, with all government revenue liabilities reaching 43.2 percent of GDP in 2023. In order to preserve the legacy, Macron and his allies also want to dispel what might appear to be a permanent break in the pro-business credo. However, it can also be politically suicidal no to maintain the balance of the facade. Temporary windfall taxes on big corporations and top earners are an easy price to pay for the long-term permanent cuts in government spending and services seen as the only way to contain the deficit.
In an effort to improve the image of the far right in business circles, Le Pen is also interested in pursuing economic policies. In response to Barnier’s general policy speech on October 1, Le Pen promised to “give (the prime minister) a chance, however small.”
In turn, the new prime minister must be careful to win over Le Pen, whose support will be crucial if Barnier is to survive the coming months. The main olive branch to this point has been the appointment of right-wing Républicains senator Bruno Rétaleau as interior minister, a post that includes domestic police and immigration policy.
Retailleau is known to be fighting to make its mark on the county’s immigration system, possibly with another reform bill. It could be a chance to revive many of the harshest elements of the bill passed last winter with the votes of both the Macronist coalition and the opposition Républicains and Ansémblement National. However, in January, parts of the law were rejected by the Constitutional Council, causing fury among the far-right because of judicial oversight and obstruction of parliamentary power. Open to constitutional reform to allow tougher immigration laws, Retailleau has warned in recent weeks that “a multicultural society carries with it the risk of becoming a multiracial society” and that there is nothing sacred about the “rule of law”.
Macron and Le Pen—with Barnier as arbiter—could very well strike a deal on immigration and austerity. But new elections are probably only a matter of time. Le Pen has called for new elections next summer, when the constitution allows the National Assembly to be dissolved again.
Until then, the New People’s Front will probably be watching from the sidelines. Condemning Macron’s refusal to consider an NFP government, the left will try to rally popular opposition, although the first union marches and party-organized protests in September and October were peaceful. In the coming months, the NFP’s most important task will be to preserve its unity, to contain the centrifugal tendencies of both the left-wing French Insoumise and the centrist Parti Socialiste. A wing of the center-left establishment — mostly non-parliamentary figures, tellingly — dreams of destroying the alliance and drawing centrist elements of the NFP into an illusory pact with Macron.
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Even if unity can be maintained, the NFP will still struggle to break through the ceiling of popular support. For all the fireworks this summer, the electorate appears to have frozen into thirds and has largely remained so since 2017, with three blocs — the faltering left and center and the rising far right Le Pen — vying for power. But there may be good things in Macron’s informal deal with Le Pen. NFP is really the only alternative right now.
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