France Faces Political and Business Challenges in Crafting 2026 Budget

The French government's 2026 budget proposal, marked by tax reforms and fiscal measures, has sparked significant debate among political figures and business leaders. The proposal includes a 30-billion-euro effort, featuring 14 billion euros in new taxes and aims to rationalize business aid by eliminating 23 tax loopholes deemed ineffective, potentially generating 5 billion euros for the state. Notably, the Cotisation sur la Valeur Ajoutée des Entreprises (CVAE) will be abolished two years earlier than planned, saving businesses 1.3 billion euros, though a symbolic surtax on large corporations remains, expected to raise 4 billion euros in 2026.

Business leaders have expressed confusion over the budget's mix of tax increases and cuts, highlighting concerns despite the CVAE elimination. Specifically, price increases of 40 to 50 centimes per liter on E85 biofuels are anticipated due to reduced fiscal advantages. Prime Minister Sébastien Lecornu described the budget as "serious and reliable," defending measures such as pension freezes and a new tax on holdings, although opposition parties challenge the approach.

Senator Claude Malhuret criticized far-left and far-right parties for undermining democracy and complicating budget negotiations, describing the task as "more difficult than building an Ikea furniture piece." He blamed the government's concessions to Socialists over pensions for undermining budget viability but pledged Senate support to refine the budget and oppose obstructionist forces.

This budget articulation occurs amid heightened political tension, with concerns about the balance between fiscal discipline and the need to manage social unrest and economic realities. The 2026 budget reflects a delicate effort to reconcile tax reforms, business relief, and political opposition in a strained economic environment.