France deficit plan targets €54bn in cuts

French Prime Minister Sebastien Lecornu said Thursday the government will cut public spending by 54 billion euros in 2027, while denying that the plan amounts to austerity.

Lecornu told Le Figaro business newspaper that the cuts would bring the public deficit down to 4.8 percent of gross domestic product excluding defence spending, and five percent including military spending.

The government had initially aimed to cut the deficit from 5.1 percent of GDP last year. It acknowledged on Thursday that the deficit will likely rise to 5.4 percent.

The 2027 budget takes “an assertive stance on cutting public spending in a country that relies too heavily on it”, Lecornu said. “It is a political risk, I am not unaware of that. But we are a long way from austerity!” he added.

The plan comes as high fuel prices have renewed social tensions months before the presidential election. Oil prices above $100 per barrel have pushed petrol and diesel costs in France to record levels and prompted calls for demonstrations over the cost of living.

Lecornu said pensions would not be cut, though parliament would decide the pace of increases. He also ruled out freezing many benefits. Public sector workers will not receive cost-of-living adjustments, and income tax thresholds will rise, bringing in more revenue from individuals.

Taxes on some companies will fall because the government is set to exclude them from an additional levy on larger businesses.

France's economy contracted in the first quarter and was stagnant in the second. Concerns over public spending and debt have pushed government bond yields to levels not seen since the 2008 global financial crisis. Government debt stands at 117.5 percent of GDP.