France proposes massive austerity plan to tackle budget deficit

French Prime Minister François Bayrou aims to reduce the budget deficit by proposing a large-scale spending freeze and the elimination of two national holidays for the coming year.

At a press conference on Tuesday, Bayrou outlined a €44 billion fiscal package for 2026, which includes tax increases and spending cuts, including restrictions on pensions and social benefits, and an as-yet-unspecified “solidarity contribution” from the wealthy.

“This is a moment of decision for us,” Bayrou said, warning that France could face a crisis similar to the debt crisis that hit Greece in 2008, and argued that they have “become addicted to public spending.”

Arguing that the French need to work more to trigger stronger growth, Bayrou added that eliminating Easter Monday and May 8 Victory in Europe Day as public holidays would generate €4.2 billion in revenue. France has 11 public holidays a year, while the UK has 8.

Bayrou also proposes reducing unemployment benefits.

Only defense spending was exempted from the cuts, citing “the growing threats from Russia.” President Emmanuel Macron has instructed Bayrou to increase military spending by about 10%, or €6.5 billion, over the next two budget periods.

Most of the proposed measures have drawn criticism from left- and right-wing opposition parties. These parties are threatening to topple the government by rejecting what they describe as an austerity budget that will hit the poor, workers, and retirees.

The fragile centrist alliance supporting Macron and Bayrou does not have a majority in the national assembly, so the prime minister will have to use a constitutional article to override the lawmakers’ decision to pass the budget.

In this case, the government will face a no-confidence vote in which the votes of Marine Le Pen’s National Rally (RN) party and the Socialists will be decisive.

Le Pen’s lawmakers ousted Bayrou’s predecessor, Michel Barnier, over the budget last year. Barnier had cited a plan to delink pensions from inflation for a year. Bayrou has now revived this idea.

Le Pen described Bayrou’s announcements as “targeting all French people, workers, and retirees instead of going after wasteful government spending.”

Le Pen stated that lawmakers would not hesitate to topple the government, saying, “If Bayrou does not revise his plan, we will censure him.”

According to Eurostat, France’s budget deficit rose to 5.8% of GDP at the end of 2024, making it the third-worst in the EU after Romania and Poland.

Bayrou’s draft budget, which will be formally presented to parliament in the autumn, aims to reduce the budget deficit to 4.6% of GDP by the end of 2026, with the government aiming to reach 3% of GDP by the end of 2029.

A particularly noteworthy issue was Bayrou’s concept of an année blanche (white year). This concept refers to a year in which government spending, pensions, and social benefit programs will be held constant, without the usual automatic increases and inflation adjustments.

Bayrou stated that this concept would save €7.1 billion in 2026, making it the second-largest item in his plan, and said it symbolized the need for effort from all French people and the state.

In addition to next year’s budget proposal, Bayrou outlined a five-year plan to stabilize the total debt-to-GDP ratio by 2029.

He said that the numerous social benefit payments currently in place should be replaced by a single, capped social benefit payment for low-income individuals. He stated that all healthcare spending, from medicines to long-term sick leave, should be rationalized.

France’s interest expenses this year, excluding pensions, will reach approximately €62 billion, equal to the combined spending on defense and education, and will rise to about €100 billion by 2029 if no action is taken.

Bayrou admitted he knew his ideas would leave him at the mercy of parliament. “We are fully aware of the risks,” Bayrou said, adding that there is an “obligation and desire to overcome these obstacles” for the national interest.