French PM Barnier swept into budget crisis

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00:00Next, the French Prime Minister Michel Barnier came under pressure this Wednesday to clarify

00:03how he will plug a gaping hole in public finances as the Central Bank of France and the Public

00:08Audit Office warned spending cuts and tax hikes are inevitable.

00:12Here at France 24, Matthew-Marie Carochet has this.

00:18French Prime Minister Michel Barnier has been broaching the idea of increasing taxes in

00:22France, a plan that is dividing taxpayers.

00:27Raising taxes is just going to deepen the hole in our spending and our wallets.

00:33Raising taxes, I don't think it's a solution to France's financial problems.

00:39If it's used well, why not?

00:42It would surprise me if they put back the wealth tax, but it would be good.

00:46That's exactly part of the plan, to tax first France's wealthiest and most profitable companies.

00:53But such a plan bothers President Macron's party renaissance, because it would call into

00:57question an unspoken rule of the last seven years, no tax increases.

01:03As I'm going to be a deputy again, it's out of the question that we join a government

01:07or support the National Assembly if it's a government that raises taxes.

01:12Former Prime Minister Gabriel Attal leads Macron's party at the National Assembly.

01:17On Tuesday, tensions ratcheted up after Attal asked Barnier to clarify his plan in order

01:23to decide whether renaissance will support a Barnier government or not.

01:27Nonetheless, Barnier rang the alarm about the French financial situation on Wednesday.

01:33I find the budgetary situation of the country to be very dire.

01:37I've asked all parties to understand the true picture.

01:41The European Union has placed France on formal procedure because France's public sector deficit

01:47is projected to reach over 6% in 2025, while EU rules allow only for a 3% ceiling.

01:55If we want to keep the commitment to reduce the budget by 30 billion euros and 110 billion

02:00in the coming years, yes, there has to be somewhere a tax increase.

02:05Barnier is expected to submit a 2025 budget to Parliament next month in what is expected

02:11to be the first major test for the incoming administration.

02:16Let's get some analysis and bring in Damien Le Conte.

02:18He joins us live based at the Sorbonne in Paris, where he's a researcher and political

02:22scientist.

02:23Damien, thanks for being with us.

02:24It is a brave politician who says we're going to put up taxes.

02:28It's bound to make you unpopular, isn't it?

02:30Sorry, excuse me?

02:32It is a brave politician who says we'll put up taxes, saying that will make him automatically

02:37unpopular.

02:38Yeah, probably.

02:39But actually, the new prime minister is also in a situation where he wants to distinguish

02:47himself from the president and the previous governments.

02:51And so he is very critical of the legacy of President Macron's government.

02:56And so he explains that he has to change course vis-à-vis the policies of the previous government.

03:06But also, he needs the support of the presidential coalition in National Assembly.

03:11So that is why there is a power struggle between Michel Barnier and the president's coalition

03:16in National Assembly.

03:17Indeed, this is really, I think the French expression is, jeter un pavé dans la mare.

03:20It's kind of like throwing a big brick into the pond and going splash, and created this

03:24great political wave, which may well actually take Michel Barnier out of office, might in

03:30some way, shape or form, because it will make him very unpopular.

03:33Yeah, it will probably make him unpopular.

03:37But also, he probably has to show that he's not going to be the puppet of Emmanuel Macron.

03:46So he wants to show that he's not going to be the puppet of the president.

03:50And this is why he has some struggle to form his new government, because he has to form

03:56a government that will need the support of both his party, the conservative Republican

04:02Party, and the Macronist coalition.

04:06But also, there is a power struggle between the conservative and the centrist, the Macronist

04:12coalition, to share the ministerial positions in this government, and also to define the

04:23policies of this new government.

04:24Because Emmanuel Macron wanted a government that is not going to alter too much of his

04:29own policy.

04:30But the new prime minister is trying to show that he can change some of the policies that

04:37Emmanuel Macron has implemented in the last seven years.

04:42It is complicated.

04:43It's a word that I've heard used so many times about this situation, Damien.

04:47And as you're explaining it, and you're doing a great job explaining it, that comes back

04:51time and time again, the fact that it is a very complicated situation.

04:55How did this financial mess happen?

04:58How did this black hole come about?

05:00Can you shed any light on that for us?

05:02Well, the problem is Emmanuel Macron has implemented policies over the last seven years that were

05:11very favorable to the most wealthy and to the big business, because he considered that

05:18it was the best way to stimulate the economic growth of the country.

05:24But also it has made it difficult to reduce the public deficit, the fresh public deficit.

05:32And so right now, that is why the new prime minister is saying that the financial situation

05:37of the country is very worrying, very dire, according to him.

05:42And so there is a lot of people, including the governor of the Bank of France and other

05:49economists that are saying that the tax increases, especially on the most wealthy, are probably

05:56going to be inevitable in order to reduce the public deficit.

06:00And of course, Emmanuel Macron defending his position is looking more and more like a former

06:05president Nicolas Sarkozy.

06:06Barnier, who comes from the right, is starting to sound more like a socialist in wanting

06:10to put up taxes.

06:11We're in a very strange political paradigm here in France, aren't we?

06:15This idea of putting up the taxes on the rich, is that something that is going to actually

06:20go through, do you think?

06:21Is that something that will actually work?

06:23It's a question I should put to an economist, I suppose, but I'll put it to Damien.

06:26What do you think?

06:27Well, obviously, as I'm not an economist, I'm not an expert on this question.

06:34But I think that it is an idea that might gain some support on at least some experts

06:42and some economists that are saying that it might be necessary, at least in the urgency

06:48to reduce the deficit.

06:50And obviously, it may also be supported paradoxically by the left-wing alliance that is in the opposition

06:58to this new government.

06:59But there is indeed this strange position where the conservatives are going to the left

07:07to Emmanuel Macron and maybe find some support across the party divisions.

07:14Damien Lecomte at the Sorbonne, thank you very much indeed for giving us your insight

07:18and analysis on what is a very tricky situation, the situation here.

07:22Damien, great to see you.

07:23Thank you very much indeed, Damien Lecomte there from the Sorbonne, no less, here in Paris.

07:29Let's turn now to business.

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