France Proposes Axing Two Public Holidays to Tackle Deficit

Yahoo

7 days ago

(Bloomberg) -- French Prime Minister Francois Bayrou proposed scrapping two national holidays, part of a drastic effort to repair public finances that's set to unleash a parliamentary backlash in the fall.
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The premier put forward the plans as he unveiled an array of measures amounting to €43.8 billion ($50.9 billion) to pare back the largest deficit in the euro area. Other moves include a new tax on the highest earners, a freeze in pension and welfare payments at 2025 levels, and possible sales of the state's stakes in companies.
Bayrou said the country is addicted to public spending and in 'mortal danger,' with debt increasing by €5,000 every second and interest costs on track to hit €100 billion per year in 2029 if nothing is done.
'This is the last stop before we hit the cliff and are crushed by debt,' he said in a speech in Paris. 'The entire nation must work harder to produce more and ensure that the country's overall activity is greater throughout the year.'
The government aims to narrow the budget gap to 4.6% of economic output in 2026 from a forecast 5.4% this year, before bringing it within the European Union's limit of 3% by 2029.
The sharp belt tightening Bayrou proposed represents a politically risky shift toward the kind of austerity policies undertaken by several other European countries, often during debt crises, but largely eschewed until now by successive French governments.
However, Bayrou may not be able to push through his plan. With no majority in parliament, the prime minister is in danger of being forced out in the fall through a no-confidence vote, the same fate that met his predecessor, Michel Barnier, in December.
The centrist premier is also under pressure from investors who have dumped French bonds over the last year amid deteriorating public finances and political uncertainty, driving up borrowing costs relative to peers.
On Tuesday, the yield premium on French 10-year bonds over German equivalents remained steady at around 70 basis points, close to the widest in three weeks.
Public Holidays
France has 11 public holidays a year, more than half of which are linked to Christian observance. That's the same as the number of federal holidays in the US in most years and compares with eight days off a year in England and Wales.
But as French schools and businesses sometimes shut on days between public holidays and weekends, the calendar can have an outsized impact on economic activity, particularly in May. Canceling two days would give a boost of 'several billion euros' to public finances, according to the prime minister.
'The problem is that French production is insufficient compared with our competitors,' Finance Minister Eric Lombard said on France 2 TV. 'The French on average work 100 hours less than the Germans.'
France wouldn't be the first European country to cut public holidays. Portugal suspended four of them in 2013 in an effort to boost economic output as part of a European bailout following a debt crisis. The government in Lisbon reversed that decision in 2016.
Bayrou said he would propose abolishing Easter Monday, which often lands in April, and May 8, which marks the victory of the allies over Nazi Germany.
Jordan Bardella, president of the National Rally, immediately rejected the move, calling it a 'direct attack on our history, our roots and working people' in a post on X. Marine Le Pen, who leads the far-right party in the National Assembly, said in a separate post that her group would propose to censure the government unless Bayrou revises his entire fiscal and economic plan.
Still, the premier could still survive a no-confidence vote if, like in February for the 2025 budget, he can convince some moderate left-wing lawmakers to abstain.
Boris Vallaud, the leader of the Socialist Party in the National Assembly, said on X that the budget plans are 'brutal and unacceptable.'
The Socialists will present their own proposals in the fall, the party said in a statement, adding that 'censure is the only prospect' for Bayrou's proposal.
France's lower house of parliament isn't scheduled to come back into session until late September.
For his part, Bayrou said the urgency of reining in France's deficit trumps any calculations about whether he could survive a no-confidence motion.
'This government knows perfectly well it is at the mercy of opposition' groups, he said, adding that there were even some doubts among parties that support him. 'But the government has the duty, the desire and the wish to overturn obstacles and give our country a reason to live and believe.'
--With assistance from James Hirai, Claudia Cohen and Phil Serafino.
(Updates with comment from Socialist Party in 18th paragraph.)
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