France’s 2025 budget faces €10b amendment pressure

France’s 2025 budget debate has escalated into a political and economic flashpoint, with amendments sought by opposition parties potentially adding €10 billion ($10.6 billion) to government spending, according to Budget Minister Laurent Saint-Martin.

Prime Minister Michel Barnier’s administration, already lacking a parliamentary majority, faces heightened pressure from Marine Le Pen’s National Rally, which holds the most seats in parliament.

The party demands pension increases aligned with inflation and the withdrawal of proposed cuts to drug reimbursements. Le Pen, warned of a no-confidence vote unless their conditions are met, stating, “What I want is for the French people and their economy not to be bled dry.”

To navigate the stalemate, Barnier plans to invoke Article 49.3 of the Constitution to pass the budget without a parliamentary vote. This move risks triggering no-confidence motions from opposition parties, potentially toppling his government.

The political turmoil has shaken investor confidence, leading to a selloff in French assets. The yield spread between French and German 10-year bonds, a key risk indicator, widened to a 12-year high of 90 basis points before narrowing slightly to 81 basis points on Friday.

The European Central Bank’s signals of faster interest rate cuts provided limited relief.

With Barnier set to push through the social security portion of the budget on Monday, his government faces both parliamentary and market scrutiny in the days ahead.

Attribution: Bloomberg

Subediting: M. S. Salama