France must appease protesters without extra spending, says finance minister

{"text":[[{"start":11.68,"text":"France must prove to bond markets that it is not the sick man of Europe by passing a 2027 budget and appeasing protesters without additional spending, according to the finance minister."}],[{"start":23.08,"text":"“We have to show them that we can cure ourselves,” Roland Lescure told the FT on Monday. Regaining consumer and business confidence was vital to reviving growth, he said."}],[{"start":34.04,"text":"France’s borrowing costs have hit levels not seen for a quarter century as markets punish the nation for its inability to get public spending under control. Bond investors are also worried that the presidential election in April, in which far-right leader Marine Le Pen is polling first, will usher in more instability and make fiscal consolidation more difficult."}],[{"start":54.92,"text":"The government last week received a surprise reprieve when Moody’s refrained from downgrading France’s rating as was widely expected, a development that Lescure said was a vote of confidence in the French economy."}],[{"start":66.28,"text":"“Moody’s has reminded us . . . that France is faced with challenges, which we need to address,” he said. “But it’s also got assets.”"}],[{"start":75.16,"text":"Widespread and at times violent protests in recent weeks have darkened the mood, piling pressure on the government that is caught between the bond market and unrest in the streets."}],[{"start":85.68,"text":"High school students’ protests that began weeks ago over poor education conditions have spiralled into broader discontent over the high cost of living and President Emmanuel Macron’s administration."}],[{"start":null,"text":"

"}],[{"start":97.08,"text":"In France, the government often responds to street protests with additional spending as it did in 2019 when it offered €17bn in tax cuts and support measures to defuse the Gilets Jaunes (Yellow Vests) movement."}],[{"start":110.88,"text":"Asked whether the government would have to do something similar, Lescure said that was not possible given the deficit and pressure from markets."}],[{"start":117.48,"text":"“We don’t have the money, so we have to be creative,” he said."}],[{"start":122,"text":"Lescure highlighted recent moves to bring down fuel costs as an example of the government’s creative solutions. Macron secured an additional 300,000 metric tonnes a month of diesel from Middle Eastern producers last week and earlier arranged for the release of additional strategic reserves of petrol and diesel."}],[{"start":139.32,"text":"Prime Minister Sébastien Lecornu on Monday announced concessions to students, including 15,000 new spots in universities and trade schools, €1bn for universities over five years and €4bn in loans to regions to help them speed up school renovations."}],[{"start":156.36,"text":"Protesters and labour unions are still pushing for more measures to address the rising cost of living. Further protests are planned for Saturday and the following Thursday."}],[{"start":166.52,"text":"Asked whether the government would have to do more, Lescure said: “We’ll see what we have to do. What I can tell you for sure is that any more expenses are going to have to be compensated by more savings.”"}],[{"start":177.64,"text":"The government’s deficit target for 2027 is 5 per cent of GDP. France’s deficit hit 5.1 per cent of GDP last year, the second worst in the Eurozone after Belgium, and it is forecast to widen to 5.4 per cent this year."}],[{"start":193.64,"text":"The yield on France’s 10-year bonds hit 5 per cent last week, although they rallied significantly on Monday after the Moody’s reprieve. The spread or additional interest rate over German 10-year Bunds has also roughly doubled in the past three months."}],[{"start":208.52,"text":"Citing the impact of hedge funds and other traders on France’s bond market, Lescure said significant pressure on short-dated French bonds at the start of this month was “mostly linked with [the] unwinding of carry trades”."}],[{"start":221.48,"text":"Such trades, typically betting on higher-yielding French bonds against Bunds or interest rate swaps, were upended as yields rose, with market participants saying hedge funds were being forced to unwind trades, adding to selling pressure on the bonds."}],[{"start":235.52,"text":"“Whether it’s been cleaned out or not, I don’t know, but it’s obviously been, you know, quite a bit entangled,” Lescure added."}],[{"start":240.88,"text":"The government has proposed a deficit-cutting budget for next year that includes €43bn in cuts and tax rises but has no majority to pass it through parliament. Lawmakers in recent weeks have added a volley of amendments and rejected many spending cuts."}],[{"start":256.9,"text":"But Lescure played down the significance of such changes because the government has constitutional tools to bypass parliament. Those include the 49.3 clause that allows the government to pass a law without support from parliament as long as it survives a no-confidence vote. Although never used before, the government can also pass a budget by decree."}],[{"start":277.32,"text":"“People understand and accept that the institutional guardrails we have, [including] the 49.3 and executive orders, are probably going to have to be used,” Lescure said. “I don’t think anyone will judge that as an institutional coup d’état.”"}],[{"start":292.04,"text":"Opposition parties have warned they could topple the government if it rams the budget through without consultation."}],[{"start":298.4,"text":"Despite the market and social turbulence, Lescure appealed to French households to have confidence in the economy and to go out and spend. French households have a high savings rate averaging 17.9 per cent at the end of 2025 — a level not seen since 1980 excluding the pandemic — which they are more loath to part with in times of uncertainty."}],[{"start":318.48,"text":"“The saving rate is a big potential engine of growth,” Lescure said. “I’m probably going to be the last voice saying . . . there’s hope, look up, look up, France is not that bad.”"}],[{"start":335.04,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1793085053_9599.mp3"}