Investing.com — French Finance Minister Eric Lombard has gained support from Brussels for France’s deficit-reduction plan, a positive development for the government as it implements extensive spending cuts to mend public finances.

France has scaled back its fiscal consolidation goals following the collapse of Michel Barnier’s government in December due to a parliamentary disagreement over proposals for a significant reduction in the deficit to 5% this year from 6.1% in 2024. The new administration, led by Prime Minister Francois Bayrou, has set a new target of a 5.4% deficit. However, it has retained the objective of reducing it below the European Union’s 3% limit by 2029.

In the initial phase, Lombard has proposed €53 billion ($55 billion) of spending cuts and tax increases in the postponed budget bill for this year, which is currently under parliamentary review.

The EU’s endorsement of France’s dedication to long-term goals provides a sense of relief for Bayrou’s government as it grapples to control the deficit in a way that can both restore investor confidence and gain approval in a divided National Assembly.

Lombard, after a meeting with EU counterparts in Brussels on Tuesday, told Bloomberg reporters, “The budget we’ve presented is above all in the interest of our country. We can’t leave such a level of debt and deficit for our children and grandchildren.”

Recent political turbulence and concerns over France’s finances have led to market selloffs that increased the country’s borrowing costs relative to its peers.

The difference between French and German 10-year yields, a key risk indicator, has recently decreased to around 77 basis points from over 88 basis points in December, offering some relief.

Despite facing opposition in parliament to the budget plans, Bayrou’s government has a higher probability of getting the finance bill passed after securing the indirect support of some Socialists.

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