France's Budget Battle: What's Next?

In a recent turn of events, French senators have given the green light to the 2026 budget bill. This move sets the stage for some serious talks between the Senate and the lower house of parliament later this week. The Senate, which leans conservative, voted in favor of the bill with a count of 187 to 109. This comes after the lower house failed to pass the bill last month due to disagreements over tax plans. Now, a special group of seven lawmakers from both houses will meet on Friday. Their job is to iron out a new version of the bill. This revised version will then go back to the lower house for a final vote on December 23. If lawmakers can't agree on a new version, the government might have to use temporary measures. These measures would allow them to keep spending, collecting taxes, and borrowing until a proper budget is passed.The current government wants to keep the public sector budget deficit under 5% of economic output next year. This is a slight improvement from the estimated 5. 4% this year, which is the highest in the euro zone. However, the government is in a tough spot. They have a minority in parliament, and budget battles have already led to the fall of three governments since President Macron lost his majority in a 2024 snap election. Last week, the lower house narrowly passed the social security budget. This budget includes a pause on a very unpopular 2023 pension reform. This pause is a big concession to Socialist lawmakers, whose support the government needs to pass legislation. Amendments made by the Senate and the suspension of the pension reform have left the deficit at 5. 3%. This means the joint committee of lawmakers has a tough job ahead. They need to find ways to cut the budget and reduce the fiscal shortfall.