(Bloomberg) — French lawmakers on Thursday will try to reach a budget compromise that can get enough support to avert another government collapse and restore financial certainty for the country.
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A handful of senators and members of the National Assembly are tasked with modifying the 2025 finance plan, in part to reflect concessions made by Prime Minister Francois Bayrou’s government. The French premier aims to secure enough indirect support — particularly from the Socialist Party — to survive a no-confidence vote over the adoption of the budget next week.
The bargaining brings France and its public finances to another cliff edge after months of upheaval that toppled Michel Barnier’s government in December and left the country relying on stopgap legislation to avoid a shutdown. The uncertainty combined with gaping budget deficits has sparked market sell-offs, driving up France’s borrowing costs compared to peers.
With the prospect of a deal at the parliamentary committee appearing likely, some of the pressure has eased, bringing the spread between the yield on France and Germany’s 10-year debt to the lowest level since November earlier this week. But the threat of instability remains after Socialists walked away from budget talks Tuesday in protest over unrelated comments Bayrou made on immigration.
The center-left party is crucial to the government’s chances of survival as its abstention could prevent the adoption of a confidence motion over the 2025 finance bill next week. Marine Le Pen’s National Rally lawmakers could also keep Bayrou in power by not backing such a censure motion, but they have proved less reliable negotiators after turning against Barnier at the eleventh hour.
In addition to demanding Bayrou step back from his remarks on immigration, Socialists have also ramped up their demands for significant changes after the senate adopted a version of the budget bill with steeper tax cuts.
According to Philippe Brun, a Socialist lawmaker who will sit on the parliamentary committee, his party also wants extra resources alloted to climate funds, prolonged tax increases for big companies, and raises to the minimum wage. The government has said that the overall balance of the budget must still be respected with the aim of reducing the deficit to 5.4% of annual economic output from around 6% last year.
“To not censure the government, concessions are necessary,” Brun said Wednesday on Sud Radio. “If we think the budget is more dangerous than censure, then we will censure with no qualms.”
It is likely the committee will settle on a consensus text on Thursday as a majority of its 14 members support Bayrou. The ultimate test will come when the bill — which can still be amended by the government — returns to the National Assembly on Monday.
Bayrou will then almost certainly use Article 49.3 of the constitution to adopt the finance bill without putting it to a vote as there is no majority in the National Assembly to support his government. Opposition groups on the far-left are poised to then file a censure motion that, if backed by a majority, would reject the bill and force the prime minister to resign. That vote will likely take place on Wednesday.
Bayrou is then expected to face a repeat of that sequence when he uses the 49.3 to adopt bills in the social security chapter of the 2025 budget later in February.
In a no-confidence ballot not directly tied to the budget earlier this month, Bayrou survived by a comfortable margin as both Le Pen’s far-right and a majority of Socialists abstained.
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