Budget 2025: Michel Barnier’s plan to reduce the public deficit

Prime Minister Michel Barnier outlined his budget strategy for 2025 during his general policy statement to the French National Assembly on Tuesday, October 1. The stated aim is to reduce the public deficit to 5% as early as next year, before bringing it down to 3% by 2029, following an expected rise to 6.1% this year. To achieve this, the government aims to save 60 billion euros, through a combination of spending cuts, temporary tax hikes and the postponement of certain measures.

40 billion in spending cuts

The government intends to concentrate its efforts on cutting public spending, with a target of €40 billion in savings. Ministries will be the first to be affected, having to reduce their budgets by around 20 billion. This reduction will be supplemented by savings in other areas, such as the spending of state operators and local authorities, which will have to moderate their rate of spending.

Postponement of pension increases to July 1

Among the most symbolic measures, Michel Barnier announced the postponement of pension increases. Initially scheduled for January 1, this increase will be postponed to July 1, thereby reducing expenditure by almost 4 billion euros by 2025. Pensions will remain indexed to inflation, in line with Emmanuel Macron’s commitment, but this postponement will limit the financial impact in the short term.

Targeted and temporary tax increases

To supplement these savings, the government plans to generate around €20 billion in additional revenue. Michel Barnier insisted on the temporary and exceptional nature of these measures, which will mainly target large companies with high profits, as well as the wealthiest households. On the other hand, the Prime Minister assured that there would be no general tax increase for the middle classes.

Green measures for new revenues

Part of the new revenue will also come from measures to promote the ecological transition. The government plans to raise around 1.5 billion euros by imposing a malus on the most polluting vehicles and by tightening taxes on the most environmentally damaging modes of transport. These decisions will be incorporated into the Finance Bill via amendments.

An ambitious budget challenge for 2025

The Finance Bill is due to be officially presented to the Council of Ministers on October 10. The government’s plan is based on a skilful blend of spending cuts and limited tax increases, while protecting middle-class households. The challenge remains daunting, but Michel Barnier seems determined to steer public finances back on track.