Barnier announces a temporary tax on large fortunes in France

A dialogue attitude and a possible reform of the electoral system in exchange for public spending cuts. The French Prime Minister, Michel Barnier, made this proposal to the opposition to his Government during his general policy speech on Tuesday. "Our public deficit will exceed 6%. This situation weakens us in Europe," warned the conservative leader from the podium of the National Assembly. The presentation of his Executive's guidelines was marked by the complicated situation of public finances in France, as well as the preparation of next year's Budget. Its presentation was supposed to take place on October 1, but it was postponed to next week due to political instability.

"Our responsibility is to reduce this burden and regain budgetary maneuvering margins," Barnier said. The 'premier' announced his intention to reduce the public deficit from 6% to 5% for next year and bring it down to 3% by 2029, the limit set by the contested European rules. This is a modification of previous forecasts, which aimed for 4.1% in 2025.

Despite this change in the calendar, Barnier announced cuts. "The first remedy is reducing public spending," he assured. The current draft of the 2025 budget includes a reduction of about 10 billion euros, taking inflation into account. But that cut could be accentuated, representing the first test for the Executive, the most right-wing France has had since 2012 and which only has the support of 212 deputies out of a total of 577.

The cuts could not only anger the left-wing and far-right opposition but also the boisterous French society. The general policy speech coincided with a day of sectoral strikes and union protests in 180 localities, with limited follow-up. "In the current context (of loss of purchasing power), it is difficult for people to strike, but this does not mean there is no social anger in the country. And it can explode at any moment," warned Jean-Louis Maury, CGT delegate, in statements to this newspaper from the front rows of the demonstration in Paris, which gathered just about 20,000 people according to organizers.

To make the austerity pill less painful—a risky policy in an economic slowdown context—Barnier positioned himself in favor of a special and temporary tax on large fortunes and companies with higher profits. Although it probably won't have a significant impact on tax collection, it would represent a nuance compared to the tax cuts for the richest applied by Macron since 2017.

The Prime Minister also advocated for a 2% increase in the minimum wage starting early November. It will be the first increase since 2012 beyond inflation adjustments. However, that minimum wage increase (currently 1,426 euros net per month) falls short of the nearly 15% rise promised by the left-wing coalition New Popular Front (NFP), which narrowly won the legislative elections on July 7. After being excluded from Government, their representatives reacted on Tuesday by showing electoral cards in Parliament.

"Faced with the chaos you leave us, we have three priorities. The first is to censure your Government," said Mathilde Panot, president of La France Insoumise parliamentary group (comparable to Sumar or Podemos). Due to a lack of a supportive parliamentary majority, Barnier did not undergo an investiture vote. As compensation, he promised a "dialogue attitude" with all oppositions and opened up to pushing for a proportional electoral system instead of the current two-round majority system. Additionally, he made a nod to the far-right National Rally (RN) by advocating for extending the detention time for illegal immigrants in France's equivalent of CIEs. That period had already been extended from 45 to 90 days in 2018.

However, Marine Le Pen, RN leader, reproached him for his lack of concreteness on immigration: "Listening to you, I see you make many observations but provide very few solutions." Despite this, the far-right leader promised "responsible" and "constructive" opposition. She confirmed that her representatives would not censure the Government for now, leaving no chance for NFP's censure motion that will probably be voted on next week.