Barnier’s French borrowing goal ‘unreachable’, warns Barclays
The French prime minister’s budget plans have been criticised as containing “unreachable goals” by economists at Barclays.
The banking giant’s economists told clients that Michel Barnier’s plans to cut the budget deficit would be derailed by his need to keep coalition partners on board.
Mr Barnier has pledged to cut the deficit to 5pc of GDP, from around 6pc this year. But Barclays says this is “unreachable” and noted that France “has consistently deviated” from its published plans.
The economists said: “This would require a sizable fiscal adjustment which we doubt the government will be able to implement… The measures required to achieve this would be incompatible with the political agendas of the various parties supporting the coalition government. Besides, a large fiscal consolidation would likely weigh on what is already a weak economic outlook.”
Barclays is predicting that France’s deficit will instead be 5.8pc of GDP in 2025. The bank also said it expects public debt to continue to increase, reaching 115.2pc of GDP in 2025, up from 112pc this year.
The bank added: “Given the weak parliamentary support for the Barnier government, using Article 49-3 of the Constitution to adopt the budget (eg. bypassing a vote in the National Assembly) seems increasingly likely at this stage.
“If this happens, no-confidence motions could be tabled by opposition parties which, if adopted, would bring down the government and lead to the rejection of the budget.
“In other words, the adoption of the 2025 budget could ultimately depend on [Marine Le Pen’s party] RN abstaining in any no-confidence vote triggered against the government.
“This week, following the prime minister’s general policy address, Le Pen reiterated that her party would ‘refuse to vote no-confidence motions a priori in order to give the government a chance, however small, to finally implement the necessary recovery measures’.
“Nevertheless, she outlined a number of red lines, particularly with regard to tax increases on the working and middle classes.”
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