Barnier and Macron on collision course over fixing France’s finances

PARIS — Prime Minister Michel Barnier and President Emmanuel Macron appear headed for a major clash over the state of France’s public finances ahead of a possible credit downgrade on Friday.
Barnier, who was appointed by Macron in September, has repeatedly warned that he sees the country’s increasing deficit as France’s most urgent problem and one that needs immediate fixing. His government unveiled a budget earlier this month aimed at reining in the deficit through draconian tax hikes and spending cuts while promising not to kill growth.
But Macron appears to fundamentally disagree with that strategy of budget discipline, according to public comments from the French president and private remarks from some of his advisers. The president and his entourage believe that economic growth, fueled by the reforms he implemented in his seven years at the Elysée, will fix France’s budget problems, and that the high deficit — expected to hit 6.1 percent of gross domestic product for 2024 — is a temporary byproduct of their plan.
“On public finances, he thinks he was right: Macronomics is still a good strategy,” said a person close to the president who, like other officials quoted in this story, was granted anonymity to speak freely on a sensitive matter.
Macron has declined to publicly endorse Barnier’s efforts to rein in the deficit via tax hikes and spending cuts. Doing so could be seen as tantamount to renouncing his economic legacy of tax reductions and generous subsidies to boost growth.
“You need political courage and you have to be fair with your people, but the the solution is not to have short-term adjustments in expenditure,” Macron said at an event in Berlin earlier this month. He also warned against increasing taxes.
“It is smarter to work on [creating jobs] than to focus obsessively on short-term measures that can kill growth,” he said.
Barnier’s team is keenly aware of that silence, and appear to believe that Macron’s team has simply ignored the issue in the name of political expediency, fearing that tax hikes and spending cuts would be unpopular ahead the June EU election and the ensuing national snap election — both of which Macron’s camp lost.
In private, the prime minister is questioning just how seriously the president is taking the “budgetary emergency,” according to someone with direct knowledge of the file.
The stakes are massive, both for France’s credibility on financial markets and for the future of European Union rules meant to keep member states from racking up debt. Barnier’s plans have appeared to ease concerns for now— though not assuage them entirely.
On Wednesday, the International Monetary Fund questioned France’s ability to reduce its deficit, echoing similar warnings from watchdogs and top economists over the past days.
“The government in France has presented ideas, proposals that move in the right direction, but we are waiting for more clarity coming from actual enacted measures in France,” IMF Director for Fiscal Affairs Vitor Gaspar told reporters. The IMF also cast doubt on the Barnier government’s prediction that its plan will be able to bring the deficit under 3 percent of GDP, in line with EU rules, by 2029.
France could face a credit downgrade by ratings agency Moody’s on Friday. Fitch revised France’s outlook from “stable” to “negative” after downgrading its credit last year.
Macron and Barnier’s disagreement is expected to take center stage with parliamentary discussions over next year’s budget in full swing in France’s National Assembly, its lower house of parliament, where lawmakers from Macron’s camp are openly questioning Barnier’s tax hikes. Centrist Energy Minister Agnès Pannier-Runacher and Justice Minister Didier Migaud have hinted they might resign because of cuts to their ministries’ budgets.
Clea Caulcutt contributed to this report.