New French PM rules out wealth tax, aims to cut budget deficit to 4.7% in 2026

PARIS (Reuters) -New French Prime Minister Sebastien Lecornu ruled out on Friday re-introducing a wealth tax or suspending an unpopular pension reform, giving some of the first indications of his policy plans as he tries to pull together a 2026 budget, and a government.

Since President Emmanuel Macron made Lecornu his fifth prime minister in less than 2 years amid a deepening political crisis, Lecornu has said little on his intentions, instead focusing on consultations with party leaders and unions.

"I am starting from a blank script," he told Le Parisien newspaper in an interview. His predecessor, Francois Bayrou, was ousted by parliament over plans for a 44 billion euro budget squeeze next year.

Lecornu said he aimed for a budget deficit of around 4.7% of GDP in 2026, not much changed from Bayrou's target of 4.6%, from a forecast 5.4% this year.

He said the draft budget would take into account the French people's demand for more fiscal fairness. It would fall on parliament to determine the budget's final package, he said, urging lawmakers to enter into a spirit of consensus finding.

"It is parliament which will shape the nation's budget," he said, later adding: "In the end it will not be Lecornu's budget: compromises will have to be found in the chamber."

That will not be easy to find. Macron's ruling alliance does not have a majority and likely needs the support of both conservatives and socialists to get a budget over the line. Two of the policies he ruled out - a wealth tax and a suspension of the pension reform - are key Socialist Party demands.

"There is political and societal demand for greater fiscal justice, particularly in order to restore our public finances. We cannot dismiss this debate out of hand," he said. "Next, is the Zucman tax the right answer? The only answer? Personally, I do not believe so."

He was referring to a proposal by economist Gabriel Zucman and backed by the Socialists, who want a 2% wealth tax on France's 0.01% wealthiest in the 2026 budget as their price for support.

Lecornu warned that if France cannot agree to a budget between now and the end of the year, the deficit would risk hitting six percent next year, but played down financial market worries about France's debt, saying that "the IMF is not at France's doorstep".

Lecornu, who was appointed on Sept.9, said he aimed to pull a government together by early October.

(Reporting by Sudip Kar-Gupta, Gabriel Stargardter, GV De Clercq, Richard Lough; writing by Ingrid Melander; Editing by Richard Lough)