(Bloomberg) -- French Finance Minister Antoine Armand said the government will present a budget this week that respects European Union rules as he seeks to reassure partners in the bloc and markets over the country’s runaway deficit.
Armand is due to present the newly appointed administration’s policy priorities at a meeting of euro-area finance chiefs in Luxembourg later on Monday, as is customary when governments change.
“It’s a budget that will be fully in line with new European fiscal rules that France contributed to,” Armand said in a telephone briefing with journalists.
France’s finances are in the spotlight after it announced a series of slippages in plans to bring the budget deficit back within the EU limit of 3% of economic output.
The current government, which was appointed last month after snap elections in July, has said it will now meet the goal by 2029, instead of 2027 as the previous administration planned. As a first step, it plans €60 billion ($65.8 billion) of spending cuts and tax increases next year to bring the gap to 5% of economic output from around 6.1% in 2024.
The political turbulence after elections and the widening hole in public finances has put markets on edge in recent months, driving up France’s borrowing costs compared with other European countries. The premium the country pays on 10-year bonds compared with Germany is close to 77 basis points, up from below 50 before President Emmanuel Macron dissolved parliament.
The budget plans are a first test of new European rules on how to meet fiscal targets that were designed to tailor adjustments to individual countries. Member states can get extra time to rein in deficits if they present longer-term reforms.
Arriving at the meeting of finance officials, EU Economy Commissioner Paolo Gentiloni said technical discussions began last week with the new French government on both next year’s budget and its mid-term fiscal plan.
“I had also a conversation with the new finance minister and I consider this conversation promising,” Gentiloni said.
The French government is due to unveil its 2025 budget plan at a cabinet meeting scheduled for 6 p.m. on Thursday before debate begins in parliament on Friday.
“We haven’t done the budget for the EU rules, we have done the budget to strengthen the financial and national sovereignty of the country,” Armand said. “But it turns out that respecting the commitments we ourselves formulated and inspired is a question of international credibility and sovereignty.”
--With assistance from Alessandra Migliaccio and Kamil Kowalcze.
(Updates with comment from EU commissioner starting in eighth paragraph.)
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