(Bloomberg) -- French lawmakers on Thursday will try to reach a budget compromise that can get enough support to avert another government collapse and restore financial certainty for the country.
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A handful of senators and members of the National Assembly are tasked with modifying the 2025 finance plan, in part to reflect concessions made by Prime Minister Francois Bayrou’s government. The French premier aims to secure enough indirect support — particularly from the Socialist Party — to survive a no-confidence vote over the adoption of the budget next week.
The bargaining brings France and its public finances to another cliff edge after months of upheaval that toppled Michel Barnier’s government in December and left the country relying on stopgap legislation to avoid a shutdown. The uncertainty combined with gaping budget deficits has sparked market sell-offs, driving up France’s borrowing costs compared to peers.
With the prospect of a deal at the parliamentary committee appearing likely, some of the pressure has eased, bringing the spread between the yield on France and Germany’s 10-year debt to the lowest level since November earlier this week. But the threat of instability remains after Socialists walked away from budget talks Tuesday in protest over unrelated comments Bayrou made on immigration.
The center-left party is crucial to the government’s chances of survival as its abstention could prevent the adoption of a confidence motion over the 2025 finance bill next week. Marine Le Pen’s National Rally lawmakers could also keep Bayrou in power by not backing such a censure motion, but they have proved less reliable negotiators after turning against Barnier at the eleventh hour.
In addition to demanding Bayrou step back from his remarks on immigration, Socialists have also ramped up their demands for significant changes after the senate adopted a version of the budget bill with steeper tax cuts.
According to Philippe Brun, a Socialist lawmaker who will sit on the parliamentary committee, his party also wants extra resources alloted to climate funds, prolonged tax increases for big companies, and raises to the minimum wage. The government has said that the overall balance of the budget must still be respected with the aim of reducing the deficit to 5.4% of annual economic output from around 6% last year.