France to start 2026 without budget after talks fail
Sign up now: Get ST's newsletters delivered to your inbox
French Prime Minister Sebastien Lecornu speaks at the National Assembly in Paris on Dec 16.
PHOTO: REUTERS
Follow topic:
PARIS - France faces emergency stopgap legislation to avoid a government shutdown after lawmakers abandoned 2026 budget talks on Dec 19, failing to agree on a compromise Bill.
Members of a joint committee of lawmakers from both houses threw in the towel after less than an hour of talks to agree to a budget Bill.
Prime Minister Sebastien Lecornu said he would consult with key political leaders on Dec 22 on the next steps to be taken, adding there was no longer enough time for a parliamentary vote on a budget before the end of the year.
The collapse forces Mr Lecornu to seek emergency legislation to allow spending, tax collection and borrowing in the new year until a proper budget can be agreed.
Central bank governor Francois Villeroy de Galhau warned this offers only a short-term fix that makes no policy choices and includes no cost-saving or tax measures, potentially driving the deficit significantly higher.
France used similar emergency legislation in 2024, which Budget Minister Amelie de Montchalin said cost €12 billion (S$18 billion) before a full budget passed in early February.
Deficit battle intensifies
Investors and ratings agencies are scrutinising France’s finances as Mr Lecornu struggles to rein in a budget deficit running at 5.4 per cent of output in 2025 – the euro zone’s highest.
The minority government insists on keeping the fiscal deficit below 5 per cent in 2026, already retreating from its original 4.7 per cent target after making costly concessions to Socialist lawmakers.
The Senate approved a 2026 budget on Dec 15 with a fiscal deficit of 5.3 per cent after conservatives blocked tax hikes to offset a bigger-than-planned funding shortfall in the social security budget that the lower house had approved.
Fresh negotiations in January may prove equally difficult. Pressure is mounting on Mr Lecornu to invoke special constitutional powers to bypass Parliament – something he has pledged not to do.
Conservative Republicans party head Bruno Retailleau urged him to use those powers, though doing so would likely trigger a risky no-confidence vote that could topple his government.
Mr Lecornu’s minority government has little room for manoeuvre in France’s fractious Parliament, where budget battles have already toppled three governments since President Emmanuel Macron lost his majority in a 2024 snap election. REUTERS
