Explainer-French PM aims to soften opposition to his budget to avert new crisis

By Leigh Thomas

PARIS (Reuters) -French Prime Minister Francois Bayrou has to convince opposition Socialist lawmakers in the coming months to tolerate his 44 billion euro budget squeeze or he faces the risk of being toppled.

Bayrou is bringing his 2026 budget to a fractured parliament where hard-left and far-right parties threaten no-confidence motions against him unless he makes major revisions. If he can convince the Socialists at least to abstain from backing such motions, Bayrou's minority government could get the budget through, however, meaning he must rewrite the legislation enough for them to stomach it.

Politicians will be heading off for the summer break, with parliament in recess until Sept. 22, effectively giving Bayrou two months to try to soften the Socialists' resistance to his plans.

BAYROU'S PROPOSAL

Bayrou aims to reduce France's budget deficit, the biggest in the euro zone, from 5.4% to the European Union's 3% GDP limit by 2029. His 43.8 billion euro ($51 billion) package freezes most non-defence spending and eliminates two public holidays.

Nearly 21 billion euros comes from limiting social and local government spending growth, with no inflation adjustments for public sector wages or welfare benefits. Another 10 billion euros targets high earners through a "solidarity" tax, restricts pensioner tax breaks, and cracks down on fraud.

WHAT HAPPENS NEXT?

While politicians debate the budget over their summer break, unions are considering strike action - the hard-line CGT is in favour while the moderate CFDT has not ruled it out. The September return from the summer recess promises to be particularly tense as parties stake out positions.

Bayrou must finalise his budget bill by Oct. 1 when it is to be sent to lawmakers. Without a majority, he will likely at some point invoke article 49.3 of the constitution to adopt the budget without a vote, triggering inevitable no-confidence motions. His survival would depend on the Socialists' abstention.

SOCIALIST DEMANDS

Socialists demand a total budget revision, arguing that the spending freeze burdens average workers and pensioners while treating the wealthy with a light touch. They have criticised Bayrou's 4 billion euro tax increase on high earners as grossly insufficient.

Bayrou has signalled a willingness to adapt, but he faces constraints from allies who think France's tax burden is already excessive.

The Socialists are also against plans not to replace some retiring public workers and the scrapping of two public holidays.

IF BAYROU FALLS

Should Bayrou fail to placate the Socialists and fall, President Emmanuel Macron would have to find a new prime minister, as happened with Bayrou's conservative predecessor Michel Barnier in December. 

This would leave budget legislation in limbo during the formation of a new government, which could drag on in the absence of figures palatable to at least some parties.

Alternatively, Macron could call snap legislative elections again, plunging France even deeper into political uncertainty.

($1 = 0.8592 euros)

(Reporting by Leigh Thomas; Editing by Hugh Lawson)