France to start 2026 without budget after talks fail

By Elizabeth Pineau

PARIS, Dec 19 (Reuters) - ⁠France faces emergency ⁠stopgap legislation ‍to avoid a government shutdown after lawmakers abandoned 2026 budget talks on Friday, failing to agree on a compromise bill.

Members of a joint committee of lawmakers ‍from both houses threw in the towel after less than an hour ​of talks to agree a budget bill.

Prime Minister Sebastien Lecornu said he would consult with key political leaders ​on Monday on the next steps to be taken, adding there was no longer enough time for a parliamentary vote on a budget before the end of the year.

The collapse forces Lecornu to seek emergency ​legislation to allow spending, tax collection and borrowing in the new year until a proper budget can be agreed.

Central bank governor Francois Villeroy de Galhau warned this offers only ​a short-term fix that makes no policy choices and includes no cost-saving or tax measures, potentially driving the deficit significantly ‌higher.

France used similar emergency legislation last year, which Budget Minister Amelie de Montchalin said cost 12 billion euros ($14 billion) before a full budget passed ​in early February.

DEFICIT BATTLE INTENSIFIES

Investors and ratings agencies are ⁠scrutinising France's finances as Lecornu struggles to rein in a budget deficit running at 5.4% of output this year - the euro zone's highest.

The ‌minority government insists on keeping the fiscal deficit below 5% next year, already retreating from its original 4.7% target after making costly concessions to Socialist lawmakers.

The Senate approved a 2026 budget on Monday with ‌a fiscal deficit of 5.3% after conservatives blocked tax hikes to offset a bigger-than-planned funding shortfall in the ‌social security budget that the lower house had approved.

Fresh negotiations in January may prove equally difficult. Pressure is mounting on Lecornu to invoke special constitutional powers to bypass parliament - something he has pledged not to ‍do.

Conservative Republicans party head Bruno Retailleau urged him to use those powers, though doing so would likely trigger a risky no-confidence vote that ⁠could topple his government.

Lecornu's minority government has little room for manoeuvre in France's fractious parliament, where budget battles have already toppled three governments since President Emmanuel Macron lost his majority in a 2024 snap election.

($1 = 0.8540 euros)

(Reporting by Elizabeth Pineau and Leigh Thomas, Sudip Kar-Gupta and Dominique Vidalon, editing by Ed Osmond and Gareth Jones)

---

Serious News for Serious Traders! Try StreetInsider.com Premium Free!

---

You May Also Be Interested In

• Catastrophic storms to test China's resilience in 2026, scientists warn
• Spanish Cardinal suspends himself after sexual assault allegations
• Trump says interim accord with Iran to end war is "over"