France lawmakers fail to agree on state budget: parliament sources

A joint committee of French lawmakers on Friday failed to reach a compromise on the state budget for next year, parliamentary sources said, making it unlikely France would have a 2026 budget by year end.

The 2025 budget is now likely to be carried over into the new year as debates continue in both chambers.

France, the eurozone’s second-largest economy, is under pressure to rein in its deficit and soaring debt, but efforts have been hampered by political deadlock.

Prime Minister Sebastien Lecornu has pledged to produce an austerity budget by year end, without using a constitutional power to ram through the bill without a parliament vote, as done in previous years.

In a win for Lecornu, lawmakers on Tuesday narrowly adopted the social security budget, part of the broader spending plan, postponing an unpopular pensions reform until 2028.

But they still have to pass the state budget, which has been complicated by a tug of war between the right-leaning Senate that wants to cut costs, and a lower house in which the left has demanded more revenue.

The government is now likely to push for parliament to vote a so-called “special law” to temporarily carry over the 2025 budget into the new year while debates continue.

That vote could happen as soon as Monday.

The special law would allow the state to continue collecting taxes after January 1, effectively enabling it to keep paying civil servant salaries, as well as pensions.

But central bank governor Francois Villeroy de Galhau Friday warned this was only a short-term solution.

If France kept its 2025 budget into next year, it would lead the country to a “deficit far higher than desired”, he told France Inter radio.

Political gridlock also delayed adoption of France’s 2025 budget, with a spending plan approved in February after then-prime minister Francois Bayrou forced it through the lower house.