French lawmakers fail to agree budget compromise
· The Straits TimesPARIS, Dec 19 - French lawmakers failed on Friday to hammer out a compromise 2026 budget bill, making special legislation likely to roll over spending limits into the new year in the absence of a proper budget.
Members of a joint committee of lawmakers from both houses threw in the towel after less than an hour of talks to agree a budget bill.
Prime Minister Sebastien Lecornu said he would consult with key political leaders on Monday on the steps to be taken, adding that parliament would now not be able to vote on a budget before the end of the year.
The collapse of the talks is likely to force Lecornu to seek emergency legislation to allow spending, tax collection and borrowing in the new year until a proper budget can be agreed.
However, such a law would only offer a short-term solution, the governor of France's central bank, Francois Villeroy de Galhau, said earlier on Friday.
"The emergency legislation does not make any choice. But we need, for example, to spend more on defence," Villeroy told France Inter radio before the talks on a compromise broke down.
A special law will also lead to a deficit that is significantly higher than what is desirable, he added, "because it does not include any cost-saving measures, nor does it include any tax measures".
GOVERNMENT INSISTS ON FISCAL DEFICIT UNDER 5%
Investors and ratings agencies are scrutinising France's finances as Lecornu struggles to rein in a budget deficit running at 5.4% of output this year - the euro zone's highest.
The minority government insists the budget must keep the fiscal deficit to less than 5% next year, having already given ground on its original target of 4.7% with costly concessions to win over Socialist lawmakers.
The Senate approved a 2026 budget on Monday with a fiscal deficit of 5.3% after conservatives blocked tax hikes to offset a bigger-than-planned funding shortfall in the social security budget that the lower house had approved.
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.
Uncertainty around France's budget is costing the country 0.2 percentage points in growth, Villeroy said. REUTERS