France vows to adhere to EU spending rules

France's President Emmanuel Macron (Top-L) stands in the command car flanked by Chief of Staff of the Armed Forces (CEMA), Thierry Burkhard during the Bastille Day military parade on the Avenue Foch, in Paris on July 14, 2024. [AFP]

France's new finance minister Antoine Armand on Monday strove to convince his EU counterparts that Paris is serious about reining in its ballooning deficit and complying with the bloc's budget rules.

The new minister will present the national budget on Thursday, which Paris hopes will tackle France's "colossal" debt through spending cuts and new taxes.

On Monday, Armand was in Luxembourg to reassure his eurozone counterparts of France's policy priorities, including bringing the deficit under control.

"We have prepared a budget to strengthen the country's financial and national sovereignty," Armand said during a media briefing hours before his first meeting with EU finance ministers.

He stressed that respecting EU rules is "a question of international credibility".

Armand will also have to persuade the markets that he will achieve his goals.

Brussels has already rebuked France for breaking budget rules, placing the country under the formal procedure in July because its deficit is above the three per cent limit eurozone members are supposed to adhere to.

France must submit a multi-year plan to reduce its public deficit, but Paris obtained a delay after it took time to form a new government following snap elections.

Paris now has until October 31 to submit its budget plan to the European Commission, but discussions have already begun at a technical level between French and EU officials.

EU economy chief Paolo Gentiloni appeared to be cautiously optimistic about talks with France, telling reporters in Luxembourg that his conversations with the French minister were "promising" despite the "difficulties".

But Germany's finance minister warned against joking about with "the credibility of public finances with the financial markets", without directly referring to France.

"We must credibly reduce our deficit and our debt in order to be able to finance ourselves adequately and stably," said Christian Lindner, who often insists on the need for sound public finances.

'Sword of Damocles'

Armand was however bullish about France's push to reduce the deficit below EU rules.

"Our objective is to bring our deficit below the three per cent mark by 2029," he said, which is two years later than the promise made by his predecessor Bruno Le Maire in 2024.

In the short term, Armand aims to bring France's deficit down to five per cent in 2025 from 6.1 per cent this year.

"This is a serious, credible and ambitious trajectory for our country to fully respect the European budgetary rules," he later told reporters in Luxembourg.

Armand faces a delicate balancing act since his budget must please the markets and Brussels while ensuring it does not cause too much pain for citizens and businesses.

Time is short, however.

French Prime Minister Michel Barnier called France's debts of over 3.2 trillion euros -- more than 110 per cent of GDP -- "the true sword of Damocles... hanging over the head of France and of every French person".

EU 'falling behind'

Discussing broader issues affecting Europe, Armand insisted France was determined to advance on key priorities, including boosting the continent's competitiveness -- a key concern for European leaders -- adding he would "personally" get involved on the matter.

"The EU is falling behind China and the United States in strategic areas," Armand warned, referring to reports by two Italian former premiers, Mario Draghi and Enrico Letta, published this year that sounded the alarm about Europe's economic future.

"We must not resign ourselves to fate," he added, stressing that it was necessary to work to "deepen the single market and bolster European industrial policy".