France’s new PM tasked with forging consensus on 2026 budget • FRANCE 24 English

France’s new PM tasked with forging consensus on 2026 budget • FRANCE 24 English

[Music] Now, UK uh top news here in France today is that we have a new prime minister, I believe the fourth in the space of 12 months, and uh he’s still got the same old job, plugging the deficit gap. What can you tell us about that? Well, Alexander, the collapse of Franabai’s government was over its plans to cut 44 billion euros in public spending next year to re in France’s huge debt. Mr. Lukonu must now put a new spending plan on the table and President Macron has actually asked him to consult with all political parties to try and first agree on a budget before forming a government. That’s because if this year’s budget were to be carried over into next year, it’s projected to widen fiscal deficit further. Now, at 5.8% of GDP, France’s budget deficit was the highest in the European Union last year. Greece, while having a large debt pile, managed to end the year with a surplus at 1.3% of GDP, and Italy’s deficit was closer to the EU’s limit at 3.4%. And at 114% of GDP at the end of the first quarter, France’s debt is the third highest in the EU after Greece and Italy. But in terms of the amount, it is the highest at 3.35 trillion e. And let’s talk about why this is important. It makes it more expensive for France to borrow money on the markets, doesn’t it? With the goal of reducing fiscal deficit looking uh increasingly hard to achieve amid the political turmoil, investors have have responded with higher risks premiums on French bonds. Now the yield on France’s 10-year bond has risen from below 3% in December of last year to about 3.5%. Now the premium on the long-term 30-year bond has come down this week, but it hit the highest level since the 2009 financial crisis earlier this month. Fitch is set to review its credit rating for France on Friday. It’s currently above those for Italy and Greece. But while they saw their ratings or outlooks upgraded recently, France saw the opposite. Earlier on France 24, we asked economist Charlotte Deong Pedier how investors are viewing France right now. So the public finance are much more deteriorated in France than in other countries. So that’s very clear. But it does not mean that there is no solution. There is no way to end this uh situation. So we know that the French economy remain relatively strong that there is a way of having some more taxation. There is a way of cutting spending. So it’s more about the political situation that make it very difficult to find a budget that is a bit of a worry for the investor more than uh about the state of the economy itself. So it’s a bit different than in other um episode in history where for instance with Greece there were a lot of concern about the economy itself whether it would be possible to have taxation because people were evading taxation. It’s not the case here. The the thing is that since the political situation is so difficult uh it’s it seems very clear that it will be difficult to find an agreement and that’s a roy for investor. uh but it’s not a fullblown crisis I would say to be very sure uh it’s more like that the worry has increased so that means more higher risk premium and so higher bond yields so it seems that uh uh there is an agreement that there is a problem with France’s budget but whereas uh the bro government wanted to uh save around 44 billion euros in spending yeah the opposition wants to raise tax for the rich now one of the ideas that we’ve heard a lot in recent days is a new wealth tax proposed by economist Gabrielle Zukman. Uh it’s included in counterbudget proposals by the leftist France Amboud and the Greens parties. The idea is to impose a 2% tax on on fortunes worth more than 100 million euros and to raise an estimated 15 to 20 billion euros per year prime minister BU repeatedly warned that such a measure would only prompt investors to leave France. Now in Norway, a long-standing wealth tax also became a campaigning issue in the latest election in which the incumbent center-left block that defended it clinched victory. Brian Quinn has the details at a victory celebration for Norway’s Labor Party in Oslo. A buoyant mood Monday night. Prime Minister Yonas Gara holding on to his office and with it Labour’s economic policies aimed at reducing inequality. A lot of the Norwegian people has said that they would like four new years uh with prioritizing the money on the people that needs it most and not the people that have the most. Among those policies, the country’s long-standing wealth tax dating back to 1892. It charges 1.1% on assets worth more than 176 million croner, roughly €150,000. In the run-up to Monday’s vote, Norway’s center-right conservative party argued for reducing the wealth tax. The right-wing populist progress party wanted to abolish it altogether, arguing that it stifles entrepreneurship. Some of the Norwegians that are really creating a lot of jobs are successful businessmen. They are moving to Switzerland, to Sweden, and this is not sustainable for Norway. After Labor removed some exemptions in 2022, dozens of billionaires and multi-millionaires did move abroad. Moves many Norwegians considered a betrayal of social responsibility and the country’s egalitarian spirit. Labour says that getting rid of the tax would have cost public coffers some €2.9 billion per year. Popular finance minister Yen Stolenberg arguing that its abolition would allow the wealthiest Norwegians to pay almost nothing. Norway is one of the world’s richest nations thanks in large part to its massive oil and gas reserves. Along with Spain and Switzerland, it’s one of just three European nations to have a wealth tax.

French President Emmanuel Macron has picked defence chief Sébastien Lecornu as his new prime minister, a day after François Bayrou was voted out by parliament. The 39-year-old Lecornu’s immediate priority will be to try to forge consensus on a new budget, before forming a government. If this year’s budget were to be carried over into next year, France’s fiscal deficit, already the highest in the EU, is predicted to widen further. 
#France #budget #debtanddeficit

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