Volkswacht Bodensee - France's budget hits snag in setback for embattled PM

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

"Parliament will therefore be unable to vote on a budget for France before the end of the year," Prime Minister Sebastien Lecornu said on X after senators and members of the lower house could not agree.

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.

Lecornu was named in September -- then renamed the following month after stepping down -- after his two predecessors were both toppled by parliament over cost-cutting measures.

He had pledged to pass a budget by the end of the year, but not use a constitutional power to ram it through 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 have been unable 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 hung lower house in which the left has demanded more tax income.

- 'Special law' -

Lecornu said he would from Monday bring together "the main political leaders to consult them on the way forward".

Lecornu's team told AFP the government would be seeking to pass a so-called "special law" to temporarily carry over the 2025 budget into the new year while debates continue.

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

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

If France keeps 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.

France has been battling a deep political crisis since President Emmanuel Macron called snap elections last year that were intended to consolidate his power but instead resulted in a hung parliament and gains for the far right.

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A.Kunz--VB