France proposes emergency legislation to avert shutdowns

(Bloomberg) — France’s caretaker government will submit an emergency finance bill to parliament on Wednesday to avert a shutdown after the country and its 2025 budget bill lost a no-confidence vote last week.

The speech was likely to be the final act of Prime Minister Michel Barnier’s short tenure, which ended when Marine Le Pen’s nationalist lawmakers joined forces with the left to denounce his government’s fiscal plans.

The stopgap legislation has never been tested in its current form, adding to uncertainty about its impact on France’s already stretched public finances and stagnant economy. It applies the same taxes as in 2024 and only imposes strict minimum spending.

Only after a new government is appointed can France submit another full budget. French President Emmanuel Macron intends to name Barnier’s successor late Thursday, but the new prime minister still needs to pick a cabinet and it usually takes months to prepare a full-fledged finance bill. and passed in Parliament.

With no clear majority in the National Assembly, the fiscal equation is even more challenging. While opposition parties have said they will support emergency legislation, they remain deeply divided over how to address France’s long-term budget woes.

Barnier’s original text expected the deficit to be significantly reduced from 6.1% of economic output this year to 5% by 2025. But the opposition parties that voted him out have balked at the 60 billion euros ($63 billion) in tax increases and spending cuts needed to achieve that goal.

The so-called special law proposed on Wednesday contains only a few provisions that would allow the state to defer the same taxes imposed in 2024 and continue to issue debt. The law must be enacted just days before the end of the year to allow a decree to be issued authorizing the minimum spending that is critical to keeping the country afloat in January.

Although the interim budget bill does not give an estimate for next year’s deficit, outgoing Budget Minister Laurent Saint-Martin said that without the 2025 budget law, the deficit will be at least higher than 2024 levels under this emergency bill.

Le Pen downplayed the consequences of relying on emergency legislation and delaying the 2025 budget. The far-right leader said it would be possible to pass a full budget in early 2025 to avoid a de facto tax increase on households.

“There will be a new budget bill and we will work together so that it will be voted on probably before April,” Le Pen said on France 2 television on Wednesday.

Budget Minister Laurent Saint-Martin said on Monday that the full 2025 budget may take weeks or months to finalize, leaving households facing potentially higher tax bills and preventing the state from making new spending promise.

“The French people must realize that there is a price to pay for condemning the government,” he told TF1 television.

—With assistance from Anya Nussbaum.

(Add Budget Secretary’s comments in paragraph 8)

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