France’s caretaker government will present an emergency finance bill to parliament on Wednesday, narrowly averting a potential government shutdown following the dramatic defeat of its 2025 budget last week, Bloomberg reports.
The move marks the likely final act of Prime Minister Michel Barnier’s short-lived tenure, which ended after a no-confidence vote orchestrated by a surprising alliance of far-right and leftist lawmakers.
The no-confidence vote, spearheaded by Marine Le Pen’s National Rally party in conjunction with left-wing opposition groups, targeted Barnier’s proposed fiscal plan. The stopgap measure now before parliament is unprecedented in its current form, leaving uncertainty about its impact on France’s already fragile economy and strained public finances. The emergency bill essentially maintains the existing 2024 tax levels and provides for only minimal essential spending.
A full budget for 2025 will only be possible after a new government is formed. President Emmanuel Macron aims to appoint Barnier’s successor by Thursday evening, but the formation of a new cabinet and the preparation of a comprehensive budget bill typically take several months.
The fiscal situation is further complicated by the absence of a clear parliamentary majority. While opposition parties have indicated support for the emergency legislation, deep divisions persist over long-term budgetary solutions. Barnier’s original budget projected a significant deficit reduction to 5% of GDP in 2025 from 6.1% this year, but this plan, requiring €60 billion ($63 billion) in tax increases and spending cuts, was rejected.
The emergency bill, a so-called special law, is concise, focusing on authorizing the rollover of 2024 taxes and continued debt issuance. Its enactment before year-end is crucial for the authorization of essential spending to keep the state functioning in January. While the emergency bill doesn’t provide a 2025 deficit forecast, outgoing Budget Minister Laurent Saint-Martin warned that without a proper budget, the deficit will likely exceed the 2024 level.
Le Pen has downplayed the implications of the emergency measure and the delayed budget, expressing confidence that a full budget can be passed in early 2025 to avoid de facto tax increases for citizens. However, Saint-Martin countered that finalizing a full budget could take weeks or months, potentially leading to higher taxes and hindering new government spending initiatives.
