Richard Parks The European Union has approved France’s ambitious plan to reduce its budget deficit by 2029. While the plan has received EU backing, Prime Minister François Bayrou faces significant political challenges as he works to implement these reforms.
France Commits to Overhauling Deficit Amid Record Levels
France’s budget deficit, which reached 6.2% of GDP in 2024, is the highest in the eurozone. This exceeds the EU’s 3% deficit limit, putting France under pressure to act. The new plan includes structural reforms to unemployment insurance, pensions, and renewable energy investment, aiming to bring the deficit in line by 2029.
EU Economics Commissioner Valdis Dombrovskis praised the initiative, describing it as ambitious yet less aggressive than earlier proposals under former Prime Minister Michel Barnier. The EU Council also approved deficit-reduction plans for other high-deficit countries, including Belgium, Italy, Poland, and Slovakia, as part of its reintroduced fiscal rules with added flexibility.
Brussels had suspended fiscal constraints during the Covid-19 pandemic but reinstated them with measures tailored to address each country’s economic circumstances.
Bayrou Faces Political Tensions and Opposition
Despite EU support, Bayrou’s government is grappling with political instability. Without a parliamentary majority, President Emmanuel Macron’s party must rely on alliances with opposition factions, including left-leaning and far-right lawmakers.
Bayrou has already made concessions to soften the original €40 billion cost-cutting plan. He recently pledged to renegotiate Macron’s unpopular pension reforms and reversed plans to cut 4,000 public education jobs. These measures helped him survive a no-confidence vote last week but revealed deep divisions in the legislature.
The collapse of Michel Barnier’s government in December looms large. Barnier’s administration lasted just three months before lawmakers rejected its austerity measures. Finance Minister Antoine Armand was replaced by Eric Lombard, a seasoned banker with experience at BNP Paribas and Generali.
Lombard attended his first EU finance ministers’ meeting in Brussels this week, where he secured approval for France’s budget strategy. Speaking after the meeting, Lombard thanked his EU counterparts for their support and emphasized that the proposed reforms would require sacrifices but are crucial for the country’s future.