France Tightens Belt with Ambitious 2026 Budget Plan

The French government unveiled its 2026 budget plan, aiming to reduce the budget deficit with over 30 billion euros in public finance adjustments. The plan includes savings, new taxes, and a temporary surtax on top companies. Pension reform suspension is proposed to gain legislative support, despite potential costs.

The French government, led by Prime Minister Sebastien Lecornu, presented its 2026 budget plan, aiming to tighten public finances by over 30 billion euros—a little over 1% of GDP. The plan includes 17 billion euros in savings and nearly 14 billion in new taxes, according to the fiscal watchdog.

In a strategic move, Lecornu offered to suspend President Macron's 2023 pension reform, aiming to garner cross-party support for the budget in the National Assembly. The suspension is estimated to cost the Treasury 400 million euros in 2026 and 1.8 billion in 2027.

The budget proposes measures to cut the euro zone's largest deficit from 5.4% of GDP to 4.7% by 2026. Highlights include a 2% levy on assets in holding companies owned by wealthy households, extended surtaxes on major companies, unadjusted pensions, unchanged income tax brackets, rolled-back common tax breaks, and a levy on small shipments from Asia.

(With inputs from agencies.)