France’s Prime Minister Michel Barnier Considers Tax Increases Amid Budget Crisis
France’s new Prime Minister, Michel Barnier, has indicated he may raise taxes to address the country’s struggling budget, a proposal that could divide his centre-right political base. Barnier, who assumed office just two weeks ago, is exploring tax hikes as a solution to France’s severe budgetary shortfall.
According to reports from French media, Barnier is contemplating tax increases given the “very serious” state of the national budget. The European Union had previously warned France about breaching budgetary rules before Barnier’s appointment. Additionally, the Bank of France has deemed the goal of reducing the public deficit to under 3% by 2027, as stipulated by EU regulations, “not realistic.”
France’s public sector deficit is projected to hit approximately 5.6% of GDP this year and could exceed 6% by 2025. Barnier is set to face his first major challenge next month when he presents the 2025 budget to parliament. Securing support for the budget may prove difficult given the potential backlash from his political allies.
Barnier’s predecessor, Gabriel Attal, who led President Emmanuel Macron’s Ensemble pour la République group, has called for a reassessment of their political strategy in light of Barnier’s tax plans. A scheduled meeting between Barnier and Macron’s supporters has been delayed, adding to the uncertainty surrounding the new administration’s stance.
Within the right-wing Les Républicains party, concerns have been voiced about Barnier’s potential tax increases. Véronique Louwagie, a party MP, criticized the idea, stating, “We currently have the highest level of taxes and contributions in Europe. Let me remind you that these contributions are levied on households and businesses.”
Although no specific tax hikes have been confirmed, speculation suggests that Barnier may target the 25% corporate tax rate and consider reinstating a wealth tax. The latter could be a strategic move to gain support from left-leaning members of the National Assembly, who might be crucial for passing the budget and securing coalition backing following France’s contentious parliamentary elections in July.
Conversely, increasing taxes could alienate the far-right National Rally, who hold the power to initiate a vote of no-confidence against Barnier. Such a vote could gain support from left-wing MPs, further complicating Barnier’s political landscape.
As Barnier navigates these challenges, his approach to the budget and tax policy will be closely scrutinized, with potential implications for France’s political stability and economic recovery.
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