France asks Brussels for extra delay on spending plans

Unlock the Editor’s Digest for free

Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

France has asked the European Commission for a further delay in submitting its budgetary plans for the next few years, as Brussels grows increasingly concerned about Paris’s ability to rein in spending.

The newly minted French government on Sunday sent a letter to the commission requesting to deliver its road map on how it plans to comply with new EU fiscal rules by October 31, two weeks past the deadline, people familiar with the process told the Financial Times.

France’s ability to put forward credible budget cuts, and the commission’s assessment of them, will be the first test of the bloc’s new fiscal architecture that aims to bring public deficits below 3 per cent and public debt below 60 per cent of GDP in coming years.

Agreed earlier this year, the rules were a hard-fought compromise between highly indebted countries, including France and Italy, and fiscally conservative ones, led by Germany, who pushed for steeper and faster deficit and debt reduction.

Other countries in a similar situation with France, including Italy and Spain, will be watching closely how Brussels treats the French government to gauge how strictly they have to follow the commission’s guidance.

EU’s initial deadline for capitals to send in their deficit and debt reduction plans was September 20. But as only two of the bloc’s 27 members met that deadline, Brussels tacitly agreed to extend it until mid-October.

Sixteen EU countries, including Italy and Spain, have indicated they will meet that deadline, according to commission officials. The remaining nine are expected to miss it due to their protracted government formation, such as France and Belgium, or upcoming general elections, such as Austria and Romania, they said.

A delay can be agreed with Brussels as long as it is “reasonable” and countries do “submit their plan swiftly, once a new government has taken office”, the commission said.

France has grappled with political instability and deteriorating public finances since President Emmanuel Macron called for snap parliamentary elections this summer. The commission has put France in what it calls its excessive deficit procedure, which places extra scrutiny on Prime Minister Michel Barnier and his spending plans.

As a former EU commissioner and the bloc’s Brexit negotiator, Barnier is acutely aware of the expectations Brussels has: more than €15bn in spending cuts a year over the next seven years, accompanied by painful reforms his rightwing government may not have the parliamentary support for.

Over the weekend Barnier appointed two ministers reporting directly to him when crafting the budget for 2025 and outlining cuts to bring down a spiralling public deficit, set to overshoot its target and reach at least 5.6 per cent this year.

EU officials and the French finance ministry are in talks to agree on a realistic spending trajectory that is also sufficiently restrictive.

“The ideal scenario is we agree on the plan [before it is submitted] to avoid rejecting it,” said an EU official familiar with the negotiations.

Barnier has already outlined some ideas for finding extra tax revenues to balance the books, including taxing the wealthy and large companies.

“I will not heighten the burden of taxes . . . on the most modest, or on working people or the middle classes,” Barnier said in an interview with the TF1 news channel on Sunday, adding he was not excluding “targeted levies” or that “the wealthiest participate in the national effort”.

It is unclear, however, how such measures could be adopted by the highly fragmented parliament, especially as his own conservatives are opposed to higher taxes and Macron’s centrists want to preserve the president’s pro-business legacy.

France had managed to find about €25bn in spending cuts for 2024 including by freezing ministerial budgets and unwinding energy subsidy schemes, but replicating that might not be enough to make up the shortfall in future without higher tax income.

If France submits a multiannual spending plan and a 2025 draft budget that is much less restrictive than what is expected, it would result in a confrontation that Brussels wants to avoid at all costs.

The French finance ministry and the prime minister’s office declined to comment.