France Moves Closer to 2026 Budget Agreement with Socialist Support

Overview of the 2026 Budget Negotiations

PARIS, Jan 19 (Reuters) - France was moving closer to a 2026 budget deal on Monday after the government presented a last-ditch proposal that made concessions to most political parties, senior Socialist lawmaker Boris Vallaud told daily newspaper Le Parisien.

Government's Concessions to Socialists

President Emmanuel Macron's government lacks a majority in parliament and 2026 budget negotiations in the fragmented legislature have dragged on for months, forcing a rollover budget in the meantime to keep the country afloat.

Potential Impact on Economic Growth

Needing to win support from the Socialists without alienating conservatives, Prime Minister Sebastien Lecornu on Friday said he would no longer cut a tax rebate on pensions, and that a monthly income supplement benefit for low‑income workers would rise by some 50 euros per month for 3 million households.

Next Steps in the Budget Process

Cheap meals for students in university canteens would be extended, and steps would also be taken to boost affordable housing. To help finance these measures, a corporate surtax on large companies, which was supposed to last only one year, would be extended through 2026 and raise 8 billion euros.

"The Prime Minister's announcements allow us to imagine that we will not need to vote no-confidence," Vallaud, who leads the Socialists in the National Assembly, told Le Parisien in comments published on Monday.

Lecornu's office said late last week that it was impossible to adopt a budget by a vote in parliament, meaning he will have no choice but to bypass parliament either by invoking special constitutional powers or adopting the budget by executive order.

Both options would mean a no-confidence vote against the centrist government, making the Socialists' support critical for its survival.

Vallaud said "assurances" were still needed on the reintroduction of a property wealth tax and the taxation of holding companies to improve the country's deficit levels. 

Lecornu repeated on Friday the budget deficit would be no higher than 5% of GDP, and possibly lower.

Cabinet ministers will meet on Monday to discuss options for pushing the budget through without a vote in parliament, government spokeswoman Maud Bregeon told Franceinfo on Sunday.

"The good news is that the prospect of early legislative elections is receding, and the government should remain in place for the moment," ING analysts said in a note on Sunday.

"However, the final budget is far from business‑friendly, and the tax increases are likely to weigh on investment and hiring in 2026, with a negative impact on economic growth." 

($1 = 0.8601 euros)

(Reporting by Alessandro Parodi, editing by Richard Lough and Toby Chopra)