French lawmakers spare pensioners from cuts as budget review begins

French Lawmakers Block Pensioners’ Tax Cut as 2027 Budget Debate Begins

French Parliament Debates 2027 Budget and Pension Reforms

Initial Review and Scrapping of Pensioners’ Tax Break

PARIS, Oct 7 (Reuters) - French lawmakers began their review of the government's 2027 budget on Wednesday, scrapping in one of their first moves a planned reduction in a tax break benefiting pensioners.

The rejection of the measure straight out of the blocks sets the stage for a rocky ride in parliament for the minority government trying to push through its €43 billion ($48 billion) savings package.

Economic Context and Government Objectives

France’s Public Finances and Budget Deficit Targets

With France at the centre of a global bond market selloff over its weak public finances, Prime Minister Sebastien Lecornu is seeking to cut the budget deficit from 5.4% of economic output this year to 5% next year.

Political Tensions Ahead of Presidential Election

Lawmakers have been hardening their positions as parties try to build political momentum ahead of next year's presidential election, which polls suggest far-right leader Marine Le Pen could win.

Details of the Pension Allowance Proposal

Finance Committee’s Rejection

The finance committee in the lower house rejected a government proposal to lower the effective ceiling on the 10% pension allowance, from €4,439 to €3,000 for retirement pensions. The measure is ostensibly to cover "professional expenses" even though most retirees do not have any.

The proposal could be revived in a later stage of the legislative process, though it could be shot down again given the broad rejection among parties in the finance committee.

Political Reactions and Implications

Opposition from Far-Right Lawmakers

"We oppose that the consolidation of the public accounts is done on the backs of retirees," said lawmaker Claire Marais-Beuil with the far-right National Rally (RN) during the debate.

Reluctance to Affect Pensioners’ Purchasing Power

Many politicians have long been reluctant to pass any measures that would hurt pensioners' purchasing power since older voters turn out in higher numbers than other age groups.

Broader Pension and Savings Measures

Pensions as a Major Public Expense

Pensions are by far France's single biggest public expense, reaching €436 billion next year, or 14% of economic output.

Government’s Plan to Limit Pension Increases

As part of its savings measures, the government also wants to raise pensions less than the rate of inflation for all but those on the lowest incomes, which it expects would save €4.1 billion.

Currency Exchange Rate

($1 = 0.8941 euros)

(Reporting by Leigh Thomas; additional reporting by Elizabeth PineauEditing by Tomasz Janowski)