France asks large companies and wealthiest households to contribute

Photo: Ludovic Marin Agence France-Presse To get this budget adopted, Prime Minister Michel Barnier has little room for maneuver, given the lack of a majority in the National Assembly.

Agence France-Presse in Paris

Published at 16:11

• Europe

Under intense pressure to find savings due to a “colossal” debt that worries the European Union, the French government unveiled its draft budget for 2025 on Thursday, which includes “exceptional” contributions requested from the wealthiest households and large companies.

The government of Prime Minister Michel Barnier (right) has set itself the objective of reducing the deficit by 60 billion euros (CA$90.2 billion) in order to prevent it from exceeding 6% of GDP, a trend that has led to France being subject to a Brussels procedure for excessive deficit.

Paris will thus subject around 400 large companies, for two years, to an “exceptional contribution” on their profits made in France in 2024 and 2025 in order to participate in the recovery of public finances.

This measure, which concerns companies with a turnover of at least 1 billion euros, should bring in 8 billion euros in 2025 and 4 billion in 2026 (respectively 6 billion and 12 billion CA$).

The French government also plans to introduce for three years a “temporary and exceptional contribution” targeting the wealthiest households that would bring in 2 billion euros in 2025, in its draft budget for 2025 focused on the recovery of public finances.

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This mechanism concerns those who are already subject to the exceptional contribution on high incomes (i.e. a reference income of 250,000 euros [CA$376,000] for a single person and 500,000 euros [CA$751,000] for a couple).

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In addition, the government plans to introduce an “exceptional tax” on large maritime freight companies, which should bring in 500 million euros (CA$750,000 million) next year, and should only affect the main French shipping company CMA-CGM.

Room for maneuver limited for the highest debt in the EU

In a country that is the European champion, public spending will continue to increase, but less sharply. Some 2,200 civil servant posts will be eliminated, particularly in national education.

France saw its debt swell to 112% of GDP in June, the highest level of debt in the European Union, ahead of Greece and Italy. Its ten-year borrowing rate exceeded that of Spain on the debt market at the end of September, a first in almost 18 years.

Michel Barnier's room for maneuver is, however, narrow, in the absence of a majority in the National Assembly. In addition, several ministers and deputies have expressed their concerns this week about the expected efforts.

“I want this effort to be fair and balanced,” Mr. Barnier said on Thursday, adding that “the attractiveness or credibility of the French signature must be preserved.”

Paris knows that its European neighbors are waiting for it, and on Monday it sent its Minister of the Economy, Antoine Armand, to Luxembourg to try to convince his counterparts in the European Union of its budgetary seriousness.

Risk of destabilization

Michel Barnier nevertheless warned that France would not reach the deficit ceiling of 3%, in force within the euro zone, before 2029, two years later than the deadline set by the previous government.

For the 2025 budget, he estimated that the reduction of expenditure, “the first remedy” according to him, should allow 40 billion euros (CA$60 billion) to be saved.

The early legislative elections called by President Emmanuel Macron after his party's bitter defeat in the European elections in June have resulted in a hemicycle fragmented into three blocs in the National Assembly.

Michel Barnier, who has formed a government essentially from the right and the centre-right, will have to deal with the frontal opposition of the left, which tried in vain on Tuesday to bring him down with a motion of censure.

The draft budget is considered “austerity” by the left, but lacking “breakthrough” by the far right.

The leader of La France insoumise (radical left), Jean-Luc Mélenchon, described this draft budget as a “calamity”, deploring “the 4,000 fewer posts in education”. “After having spread misery, here is the organization of ignorance,” he added on X.

The National Rally (far right) MP Jean-Philippe Tanguy believes, for his part, that he “does not see a break with the mismanagement of the last 50 years”.

Mr Barnier’s predecessor, Gabriel Attal, said on Wednesday that he feared “too many taxes” and “not enough reforms”, “with the risk of destabilising our industries and the working middle class”.

In this context, no one imagines that the government will be able to exempt itself from using article 49.3 of the constitution, which allows a text to be adopted without a vote.