France now has "one of the worst" public deficits in its modern history, the newly-installed Minister for Economy, Finance and Industry Antoine Armand said Tuesday. He also confirmed that new taxes on the wealthy and big businesses are on the table to get finances back in order.
Armand stated that he would engage with economic stakeholders, including unions and employers' organisations in an effort to reduce government overspending.
The deficit is expected to reach 5.6 percent or more of GNP this year - almost double the European Union limit.
"Apart from one or two one-off crisis years in the past 50 years, we have one of the worst deficits in our history," Armand told broadcaster France Inter.
"On that level, the situation is grave."
Parliamentary challenges
The new government, led by conservative Prime Minister Michel Barnier, faces a challenging parliamentary process in the coming months.
Ministers must try to get a 2025 budget that includes measure to repair public finances through the National Assembly lower house, which is currently divided into three groups after July's inconclusive snap elections.
Barnier can count on support from conservatives and President Emmanuel Macron's much-reduced camp, but the NFP left alliance and the far-right National Rally (RN) could topple the government at any time in a confidence vote if they joined forces.
In a Sunday interview, the prime minister brought "targeted" tax rises on "wealthy people or some large companies" into play as part of a plan to improve finances.
Barnier is expected to present his draft budget early next month, an unprecedented delay from the usual 1 October deadline after Macron took all summer to name a new government chief.
Spare working people
Increasing levies is a departure from policy under seven years of Macron-led governments, which sought to encourage economic activity by reducing taxes on companies, housing, and wealth.
The tax take was reduced by around two percentage points of GDP, to 43.2 percent, between Macron's first election in 2017 and 2023, according to the national statistics agency INSEE.
"It's been seven years of not wanting to increase taxes. That can make sense, but you have to cover it by making an effort to reduce spending... otherwise you blow up the deficit," said Thomas Philippon, an economist and professor at New York University who advises the French government.
Patrick Martin, head of bosses' federation Medef, has said he is "open to discussion" about tax rises, as long as the state makes a much greater effort with companies.
Barnier was to meet Martin and the moderate CFDT union on Tuesday afternoon.
"My job is to make sure that any potential taxes that will exist do not hobble our growth, do not hobble job creation," Armand said.
"We will not place a heavier tax burden on working people, people who belong to the middle class."
(with newswires)
