France plans to reduce budget deficit by raising taxes and cutting spending

In France they want to reduce the budget deficit by increasing taxes. Bloomberg reports this.

The French government has unveiled a plan of 43 billion euros ($48.6 billion) in new measures to reduce the budget deficit to five percent of GDP in 2027 from 5.4 percent in 2026.

“To close the gap between France and its main European partners, it is about trust, confidence and the ability of the French government to show that we can ensure sustainable growth in our public finances,” said Finance Minister Roland Lescure.

The government intends to save about nine billion euros ($10.16 billion) by freezing funding for most ministries, reducing the number of civil servants and freezing wage indexation in the public sector. Another 5.5 billion euros ($6.21 billion) are planned to be received through measures in the pension system.

The growth of health care costs will be limited to two percent, including through a reduction in sick leave payments. However, more than a third of the 43 billion euros ($48.56 billion) in additional measures come from increasing budget revenues. The tax burden should increase from 43.9 percent to 44.2 percent of GDP.

Against the backdrop of this plan, investors are concerned about the state of French finances. Public debt is expected to exceed 120 percent of GDP in 2027, with debt servicing costs reaching about 91 billion euros ($102.77 billion). To finance the deficit, France plans to borrow a record 340 billion euros ($383.96 billion) in 2027.