Market Analysis

Prime Minister Michel Barnier announced on Sunday that he is open to increasing taxes on France's wealthiest individuals and larger corporations to address significant gaps in public finances, while ensuring protection for lower and middle-income groups.

This statement comes as President Emmanuel Macron's office introduced a right-leaning government aimed at breaking the political deadlock following a snap election this summer. The government's immediate and challenging task will be crafting the 2025 budget amid a rising budget deficit.

"I will not raise taxes on all French citizens, including the most modest, working individuals, or the middle classes. However, I cannot exclude the wealthiest from contributing to our national effort to rectify the situation," Barnier stated during an interview with France 2 television.

France's total debt is at 110% of its GDP, amounting to nearly 3.2 trillion euros. A combination of lower-than-expected tax revenues and increased spending by local governments has driven the public sector budget deficit toward 6.2% of economic output for the upcoming year, unless addressed.

This deficit violates European Union rules, and credit rating agencies are closely monitoring France's financial decisions.

"A significant portion of our debt is held in international markets. We must preserve France's credibility," Barnier emphasized.

Having previously served as the EU's chief negotiator during Brexit, Barnier also expressed willingness to consider adjustments to Macron's pension reform, provided that these changes do not jeopardize the fragile financial state of the pension system. He mentioned the need to better accommodate the challenges faced by working mothers throughout their careers and indicated openness to feedback from employers and unions.

Macron's political opponents from both the left and far-right have threatened to file votes of no confidence against Barnier's government, arguing that it does not reflect the outcome of the July election. "This is more of Macron's agenda. It's a government without a future," commented Jordan Bardella, chairman of Marine Le Pen's National Rally party.

Barnier's government currently lacks a majority and will need to secure support from the far-right to avoid a potential collapse. In light of this, he emphasized the need for a stricter approach to immigration. "We require a European solution, as well as domestic action. We must address the immigration issue with greater rigor," Barnier said.

Paraphrasing text from "Reuters" all rights reserved by the original author.