France's Le Pen pledges to hardwire deficit cuts with 'golden rule'

Le Pen Proposes Binding 'Golden Rule' to Cut French Budget Deficit by 2032

Marine Le Pen's Fiscal Plan and Market Reactions

Le Pen's Proposal for a Binding Budget Rule

PARIS, Oct 2 (Reuters) - French far-right presidential candidate Marine Le Pen set out on Friday plans for a binding budget rule she said would put France's public finances back on track, seeking to ease investor concerns about her fiscal credibility.

Investor Concerns and Market Impact

Le Pen leads the polls for both rounds of the April 18-May 2 election, but investors have cut exposure to French assets, doubting that whoever wins the presidency next year can bring the deficit under control.

The premium investors demand to hold French 10-year bonds over their German equivalent rose above 150 basis points on Friday, its highest since late 2011, after the government's budget bill for 2027 offered little relief.

Details of the 'Golden Rule'

Writing in French newspaper L'Opinion, Le Pen said a "golden rule" she has proposed would be put to referendum, binding lawmakers in annual budget legislation, with exceptions tightly limited, similar to the way Germany's debt brake works.

Deficit Reduction Targets

The rule would require the deficit to fall by at least half a percentage point of economic output each year, which she said would cut it from 5.4% this year to 2.9% in 2032, the end of the next presidential term.

It would keep falling and stay near balance until debt - currently at 119% of GDP - reaches 60%, she said.

Implementation Uncertainties

She did not spell out when the referendum might happen or how the government would achieve that level of cuts.

Spending Cuts and Oversight Mechanisms

Planned Savings and Fiscal Programme

But Le Pen called the figures she had outlined a minimum and said that her fiscal programme, to be outlined on Tuesday, would cut spending even faster.

She reiterated a pledge to carry out €125 billion ($140.35 billion) in savings over five years, which she said would be net of tax cuts. Neither growth nor tax rises could repair the finances, she said.

Legislative and Institutional Safeguards

Lawmakers could allow a larger deficit only with a three-fifths majority, she said. A second consecutive exception would require a referendum.

The High Council of Public Finances would validate the assumptions behind the annual deficit ceiling, and the Constitutional Council would reject "insincere" budgets, she added.

($1 = 0.8906 euros)

(Reporting by Leigh Thomas; Editing by Andrew Heavens)