French Economy, Finance and Industry Minister Antoine Armand speaks during a press conference to present French government 2025 budget bill at the Bercy Finance Ministry in Paris, France, October 10, 2024.
Credit: PTI Photos
France's belt-tightening budget is meant to regain control over its "colossal" debt burden, Finance Minister Antoine Armand said on Friday, adding that the government was keeping a close eye on the views of financial markets.
The government delivered on Thursday its 2025 budget with plans for 60 billion euros ($65.5 billion) worth of spending cuts and tax hikes on the wealthy and big companies to tackle a soaring fiscal deficit.
"Our policy is not made for rating agencies but we obviously look at the international climate and at how France is viewed," Armand told France 2 TV.
"Facing a spiralling deficit, we must act and that is exactly why we presented yesterday a recovery budget. We absolutely need to regain control over our debt and our deficits."
Ratings agency Fitch is scheduled to update its view on France's debt late on Friday, although markets see a bigger risk of a downgrade from Moody's when it reviews its position at the end of the month.
Prime Minister Michel Barnier's new government is under increasing pressure from financial markets and France's European Union partners to take action after tax revenues fell far short of expectations this year and spending exceeded them.
"The magnitude of the proposed consolidation and the corresponding reliance on tax increases leave us less confident in the ability of the government to meet its 2025 deficit target of 5.0%," Goldman Sachs analysts said in a research note.
France's borrowing costs surged after President Emmanuel Macron called a snap parliamentary election and his centrist party then lost to a left-wing alliance. Financial markets' shifting perception of French risk has seen the premium on the country's bonds surpass that of their Spanish equivalent.
But the budget squeeze, equivalent to two points of national output, has to be carefully calibrated to placate opposition parties, who could not only veto the budget bill but also band together and topple the government with a no-confidence motion.