France's 2025 Budget: Austerity Measures and Tax Debates for Financial Balance

The French government cabinet has presented the budget draft for the year 2025. The objective is to address the considerable deficit in the state treasury with a combination of tax increases and spending cuts amounting to 60 billion euros. A significant part of the austerity plan is the reduction of 2,200 public service positions, particularly affecting teachers. This measure aligns with a projected decrease in student numbers. France also plans to cut its foreign aid by 1.3 billion euros. Furthermore, subsidies for apprentices and other employment programs will be reduced by 2.1 billion euros. Environmental subsidies, especially for building insulation and the purchase of electric vehicles, are to be cut by 1.9 billion euros. The pension adjustment originally planned for January 1, 2025, will be postponed by six months, saving 3.6 billion euros. Large companies with revenues exceeding one billion euros will be subject to an additional profit tax, which is expected to bring 8 billion euros into the state coffers. This regulation affects about 440 of the largest companies in France. For high-income households with annual earnings over 250,000 euros, there will be a temporary tax increase. An additional minimum tax rate of 20% is intended to counteract tax avoidance strategies and generate 2 billion euros annually. In the aviation sector, an increase in the tax on flight tickets and private jets will be introduced, accompanied by discussions with the industry. Energy providers like EDF, now nationalized, will increase their dividend to the state by 2 billion euros. A previously nearly nullified electricity tax will be slightly raised above the pre-crisis level, bringing in an additional 3 billion euros. Despite the tax adjustment, consumers could expect electricity bills to be about 9% lower due to decreased wholesale electricity prices. These profound budget decisions will now be further debated in the course of parliamentary consultations.