French Prime Minister Francois Bayrou revealed a comprehensive plan on Tuesday to stabilize the nation's public finances, outlining deficit reduction measures totaling $50.88 billion for 2026. This initiative aims to achieve a budget deficit of 4.6% in 2026, with a long-term target of bringing it down to 3% by 2029. The strategy focuses on debt reduction alongside efforts to boost industrial growth and job creation.
The plan incorporates several key measures, including a freeze on state and local spending, with the exception of defense expenditures. It also entails cutting 3,000 civil service jobs by not replacing one in three retirees starting in 2027, and merging or closing government agencies, which will eliminate an additional 1,000 to 1,500 positions. Furthermore, health spending growth will be capped at $5 billion through higher co-pays, limitations on free drug schemes, efficiency improvements, and sick-leave reforms.
Financial savings are also projected from other areas. Approximately $7.1 billion will be saved by freezing social benefits, civil servants' wages, and income tax brackets at 2025 levels for the upcoming year. An additional $9.9 billion is expected from a crackdown on fraud, curbing tax loopholes, restructuring tax breaks for pensioners, introducing an added solidarity surcharge for high earners, and implementing a new parcel tax.
France's budget deficit reached 5.8% of its gross domestic product last year, nearly double the European Union's official 3% limit. This surge was attributed to a political crisis that left four consecutive governments unable to address an unexpected drop in tax revenue and an increase in spending for a second consecutive year. The current plan by Bayrou is a direct response to these challenges and addresses concerns about potential credit rating downgrades and higher interest payments on national debt.
