France: Macron's pro-business agenda hit by budget chaos

DW News · Feb 16, 2026 · Collected from RSS

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After months of tense negotiations, the French government has finally got the 2026 budget on track. But some say the breakthrough comes at too steep a price. France's last prime minister, Francois Bayrou, was voted out over his budget plans last September. To dodge that bullet, his successor, Sebastien Lecornu of the centrist Renaissance party, sealed a deal: The Socialist Party (PS) would give him their silent support in return for several left-wing measures included in the draft. The prime minister's centrist government coalition had lost its majority in the 2022 parliamentary elections and seen its number of seats shrink further in a 2024 snap poll. Lecornu's government then survived two votes of confidence after the prime minister activated a special constitutional tool to push the bill through without a vote. "France finally has a budget," Lecornu subsequently wrote on the platform X, clearly relieved. The budget aims to reduce France's public deficit from 5.4% of GDP last year to 5% this year. However, the plan falls short of former prime minister Bayrou's 4.6% deficit and could knock France off track from its EU pledge to bring down the deficit to 3% by 2029. Meanwhile, the country's public debt now exceeds 115% of GDP. Having a budget is 'good news in itself' for France Still, for Philippe Crevel, economist and head of Paris-based think tank Cercle de L'Epargne, having a budget is good news in itself. "It was the lowest common denominator given the political fragmentation in parliament," he told DW. "Of course, the government prolonged a tax hike for the country's biggest companies, which was supposed to be a one-off last year, and pushed back plans to cut production taxes," he said. Companies with an annual turnover above €1.5 billion ($1.7 billion) will see their corporate tax increase by about 20%, while those exceeding €3 billion face a 41% hike. "The Socialists also achieved that tax brackets will be adjusted to inflation, higher top-ups for low-income workers and the suspension of the pension reform," Crevel noted. The reform, a cornerstone of President Emmanuel Macron's agenda, aimed to raise the retirement age from 62 to 64 years and had sparked months of protests in 2023. But these measures don't undo Macron's pro-business track record, Crevel thinks. "The PS failed to obtain a 2% tax on the super-rich and other measures remain in place, such as a 30% flat tax on investment income," he explained.Macron's austerity measures sparked widespread protests in FranceImage: Sylvain Thomas/AFP/Getty Images The positive legacy of Macron's first term in office Anne-Sophie Alsif, chief economist at Paris-based consultancy BDO, shares that view. "Macron wasn't able to implement additional pro-business policies after he was reelected in 2022, but we are still seeing the positive impact of some of the measures, such as lower corporate taxes implemented during his first term in office," she told DW. Alsif noted that unemployment had dropped from above 9% to under 8%, that France has been Europe's leading destination for foreign direct investment for six consecutive years and that reindustrialization was underway. She described the budget as a "necessary compromise," adding that the initial draft had been far more left-leaning and that passing it had calmed markets with interest rates on French 10-year government bonds already falling. "Households will start spending again and companies will make investments and employ additional staff," the economist pointed out. "What's more, investments will for the first time in three years make a positive contribution to our growth, which is set to reach about 1% this year."French budget discussions were 'pathetic spectacle' Eric Maumy, head of the Lyon-based insurance company APRIL, is relieved that France finally has a budget, but he's unhappy with the outcome — let alone the process. "The past few months have been a pathetic spectacle and shown France in a catastrophic light," he told DW. That's why Maumy and 2,000 other owners of small and medium-sized companies set up the movement "Trop, c'est trop" (enough is enough) in November, at the height of the budget discussions. "France has put the much-needed pension reform on ice, kept corporate taxes high and pushed up public expenditure even further, although our public spending ratio already stands at 57% of GDP — it's just not sustainable," Maumy said, adding that it will hardly encourage companies to invest. The end of an era in France? For Marc Touati, an economic adviser at Israel-based investment company eToro, the 2026 budget is the final nail in the government's pro-business approach. "The additional charge on our 300 biggest companies will have an impact on their 8.1 million employees plus their numerous suppliers. These companies will reduce their investment and lay off masses of people," the economist, who runs the YouTube channel MarcTouatiTV, told DW. He said Macron's policies could hardly be described as "supply-side" to begin with, as that would have required cutting corporate taxes and public expenditure. Instead, he argued, Macron had relied on public spending to drive growth, an approach that had failed, as reflected by sluggish GDP growth and rising bankruptcies. He added that France's debt had climbed from around €2.2 trillion in 2017 to more than €3.3 trillion today. "For the time being, the rating agencies haven't significantly noted us down. The moment they do, investors will stop buying our bonds, we'll face a recession and most certainly public unrest. This is a very dangerous strategy," Touati added. What's needed now, he said, are measures to "radically reduce corporate taxes to bring the country back on track." How can France get back on track? Henri Sterdyniak, economist and founder of the left-wing collective "Les économistes atterrés" (the dismayed economists), agrees that the budget marks the end of an era. "Macron thought reducing taxes on companies and the rich would induce significant investment and growth and drastically bring unemployment down, but he was wrong," Sterdyniak told DW. However, he's arguing in favor of a different method to relaunch the French economy. "We need a Keynesian approach with massive private and public productive investment. At the same time, we need to bring down our debt through higher taxes on the rich, for example, by levying pensioners and increasing our inheritance tax," Sterdyniak said. Edited by: Rob Mudge France in turmoil: Macron faces growing public angerTo view this video please enable JavaScript, and consider upgrading to a web browser that supports HTML5 video