The French government is being targeted by both the left and right as it prepares to implement an austerity budget.

• The French government, currently under strain, will unveil its 2025 budget on Thursday amidst the ongoing financial crisis affecting the euro zone's second-largest economy.
• The new Prime Minister Michel Barnier's government is expected to present an "austerity" budget with tax increases and cost cuts, which may cause opposition from all major parties.
• Barnier has hinted at the possible measures the conservative, centrist government will propose, such as increasing taxes on large corporations and implementing deep spending cuts to address France's growing budget deficit.

The French government, currently facing both a financial and political crisis, will present its 2025 budget on Thursday.

The new Prime Minister Michel Barnier's government is expected to present an "austerity" budget with tax increases and cost-cutting measures, which may cause opposition from left, right, and centrist parties.

In his inaugural speech to the National Assembly on Oct 1., Barnier hinted at the measures that the conservative, centrist government is likely to propose, such as increasing taxes on big business and reducing government spending to address France's financial crisis.

The government plans to tighten fiscal policy by 60 billion euros ($65.9 billion) or 2% of GDP next year to reduce the country's deficit to around 5% of GDP in 2025, down from an expected 6.1% this year, as revealed by Barnier.

Approximately 40 billion euros of the 60 billion euros will be spent through budget cuts from central and local governments, including a six-month postponement of pension indexation, while the remaining 20 billion euros will be obtained through increased taxes on wealthy individuals and large corporations.

The budget that Antoine Armand will present to parliament is being presented as France is already under an excessive deficit procedure by the European Commission due to its budget deficit exceeding the 3% of GDP limit.

Barnier's government is reportedly expected to submit its longer-term budgetary plans to the Commission within the next few weeks, as new EU fiscal rules require countries with higher debt-to-GDP ratios to do so.

Last week, France's parliament was informed by Barnier that the country's deficit would not be aligned with EU rules until 2029, which is two years later than the originally promised timeline.

The 2025 budget will be the first significant domestic challenge for the PM, who has inherited a difficult situation with France's financial problems and divided political establishment following months of political instability in the country.

After his unsuccessful decision to call a snap election in June, President Emmanuel Macron appointed Barnier as prime minister. The right-wing National Rally (RN) won the first round of the vote, while the leftwing New Front Populaire (NFP) emerged victorious in the second round.

After months of political negotiations, Macron appointed the conservative Barnier as prime minister, sparking outrage from the leftwing alliance who believed that the election outcome was "stolen" from them. Although leftwing MPs have already submitted a no-confidence motion against Barnier, which was unsuccessful in a Tuesday vote, the right-wing National Rally is adopting a "wait-and-see" stance, cautioning that Barnier is a prime minister under scrutiny.

The government of Barnier is precarious and susceptible to attacks from both the left and right of the political spectrum. If the latest budget goes against Macron's promise to keep taxes low for big businesses, it could also lead to a rift between the president and Barnier.

'Austerity' budget

If the measures are confirmed during the National Assembly's budget presentation on Thursday, it will indicate that France is facing a fiscal tightening comparable to the austerity implemented in many countries during the euro-zone crisis, according to Andrew Kenningham, chief Europe economist at Capital Economics.

Last week, he cautioned in an analysis that there was a risk that the measures could negatively impact economic activity in France.

According to the report, the budget is founded on a projection of 1.1% GDP growth for both this year and the next. However, implementing such a significant amount of austerity may hinder the achievement of even this modest growth rate, as stated in an emailed analysis.

Despite the passing of the budget and its minimal impact on economic growth, France's fiscal position would remain precarious. The deficit is expected to be 5% of GDP next year, and the EU will require a reduction to 3% by 2027.

He pointed out that France would require additional austerity measures beyond the next year, given the weak minority government and the approaching 2027 presidential elections.

Political weakness

The government's first major challenge is the budget, which is composed mainly of representatives from Macron's centrist bloc and Barnier's center-right Republicans party. Since the government lacks a majority, it is heavily dependent on opposition parties that could derail it at any time.

The no-confidence motion brought by the leftwing bloc on Tuesday revealed that Barnier's government is under the control of the far-right National Rally, which had stated that it would abstain from the vote to allow the government to have a chance, as per leader Marine Le Pen.

Teneo risk consultancy's deputy director of research, Carsten Nickel, stated that the administration will continue to face opposition from both the left and right, and that the budget may need to be passed against significant opposition.

Nickel stated in an emailed analysis that the government may face challenges in obtaining sufficient support for the budget and may need to resort to article 49.3 of the constitution, which allows a bill to be passed without a vote if the National Assembly passes a no-confidence motion against the government.

Nickel observed that Macron employed a tool to enact his contentious pension reform, but he could discourage MPs from voting against him by implicitly threatening to dissolve the National Assembly and trigger early elections. However, since Macron's decision to call for snap polls in June and July, he is unable to dissolve parliament until the following summer.

The opposition parties may weigh the risks of voting with or against the government, as well as the possibility of having to vote together to remove Barnier in the future. Their aversion to working together might provide a temporary reprieve for Barnier's government.

Nickel flagged that it might be risky for the RN to be perceived as linked to a politically volatile situation where no budget is passed, the government is toppled, and new elections to resolve the deadlock are not feasible before the summer of 2025.

It is unclear whether Le Pen intends to act responsibly during the lead-up to her potential presidential bid in 2027.

The far-right vote poses a threat to the values of the republic, prompting the leftist alliance to exist and defend them. This threatens the political cost of voting with Le Pen against a moderate government. The coordination issues between the far right and the left may give Barnier some time.