France Targets €54 Billion in 2027 Budget Savings

This aggressive fiscal consolidation comes as France faces economic strain from ongoing conflicts in the Middle East and the financial impact of recent summer climate crises.

The strategy involves a combination of deep spending cuts and an increase in tax revenue, signaling a tough approach to fiscal discipline. Achieving a 3% deficit by 2029 will require sustained effort, as emphasized by a journalist who stated, "il va falloir serrer la vis très fort puisque l'objectif, c'est d'obtenir 3 % du déficit du PIB à horizon 2029."

This decision is likely to be met with resistance from labor unions, as evidenced by 155 protests scheduled nationwide.

Since February 2017, inflation has increased by 24%, while the civil servant salary index has only risen by 5%. A journalist noted, "En 2027, il y aura un gel du point d'indice du salaire des fonctionnaires," highlighting the direct impact of this policy on public sector workers.

Adjustments to income tax deductions, now capped at 3,000 euros rather than 4,439 euros monthly, alongside a partial freeze on inflation-linked pension hikes, are designed to generate 6 billion euros. Previously, all pensions were fully indexed to inflation, but this will no longer be the case for all retirees.

The income tax deduction threshold will be reduced from 4,439 euros to 3,000 euros per month. Pensions between 1,260 and 2,034 euros will receive only partial inflation adjustments, while those exceeding 2,034 euros will face a total freeze, impacting a significant portion of retirees.

The French government has decided to tackle the approximately 470 tax loopholes that cost the state an estimated 100 billion euros annually. This move is aimed at recovering 2 billion euros by revising tax statuses, particularly those related to professional and long-term illnesses.

A specific target for revision is the tax exemption for daily allowances linked to long-term health conditions. This exemption, a long-standing provision, will be eliminated from 2027 onwards, as the government seeks to remove the most ineffective fiscal advantages.

Expanding the remuneration base to limit payroll tax exemptions could yield 3.5 billion euros, while the government also proposes renewing a reduced exceptional profit tax on large companies to raise an additional 5 billion euros. Additionally, the exceptional profit tax on large companies will be renewed at a reduced rate, generating an estimated 5 billion euros.

However, certain critical areas, such as personal services and research and development (R&D) credits, will remain untouched for political reasons. A journalist noted that "le gouvernement envisagerait même d'aller encore plus loin en limitant les exonérations de cotisation patronale," indicating the broad scope of these corporate fiscal adjustments.