Far-right French presidential candidate Marine Le Pen proposed a sharp deficit reduction and called on the European Central Bank to intervene to bring down surging debt costs as she seeks to assure investors of her financial credentials ahead of the election next year.
The National Rally leader on Tuesday set out proposals to close the deficit gap to 3.7% of economic output next year while the government’s budget aims for 5%. According to her plan — presented as a scenario if her party wins the upcoming presidential election — the gap will fall further to reach 2.2% in 2032.
“This radical effort is a deliberate choice — to send an unequivocal signal that the deterioration in public finances is over, and markets can once again regard France as a reliable partner,” Le Pen said at a presentation in Paris.
Le Pen’s proposed reduction in the deficit would far outstrip any effort France has made in the recent past and has drawn criticism from her opponents running for president. Far-left candidate Jean-Luc Melenchon wrote on social media that Le Pen was trying to win the approval of speculators and that her plan would “paralyze the economy and worsen the deficit and debt.”
Le Pen said the sharp retrenchment would restore France’s credibility and allow it to enter discussions with the ECB to intervene to free up “tens of billions of euros” across Europe, including with concessionary lending for climate projects.
“The ECB must intervene so that euro-area countries can free up the financial room to maneuver needed to invest in our sovereignty, namely defense and catching up technologically,” she said.
Her call for ECB intervention is likely to face a push back as the institution is prohibited from financing governments and has strict criteria for intervening on debt markets.
Le Pen is seeking to reassure investors as concerns over the country’s political outlook and spiraling debt fuel turmoil in the bond markets. A large share of the savings targeted by the National Rally would come from spending cuts, reducing transfers to the European Union, and cutting outlays related to immigration.
France is grappling with a punitive selloff in bond markets that has rapidly driven up its borrowing costs compared to European peers. The yield-premium on French bonds over German equivalents rose above 150 basis last week for the first time since the euro-area debt crisis.
Investors are increasingly concerned about the outlook for France’s public finances as the minority government has missed its deficit reduction target by a wide margin and lacks the political support to quickly take corrective measures.
French bonds were rallying Tuesday, part of broader gains across the European government bond market. The 10-year yield spread over German bonds was three basis points tighter at 133 basis points, down from a recent peak near 160 as the selloff starts to tempt investors back.
Beyond the short-term uncertainty over whether Prime Minister Sébastien Lecornu can survive the budget debate in parliament, presidential elections in less than seven months are raising concerns over the country’s long-term debt challenges.
Le Pen has a strong lead in polls for the first round of voting in April, but hadn’t until now given details on her economic program. Her past attempts to run for president spooked investors as she proposed radical policies, including pulling France from the euro.
Le Pen has since softened her approach and last week outlined plans for a “ golden rule ” to force governments to propose budgets to allow for debt reduction. But she still maintains costly core promises, including tax cuts on fuel and a pledge to ensure a retirement age as young as 60 for some workers.
Last week the government presented €43 billion ($48.6 billion) of new measures in next year’s finance bill to pare the deficit to 5% of economic output in 2027 from 5.4% this year. Combined with other steps taken recently, the total effort in 2027 would amount to €54 billion.
The approach takes aim at sensitive outlays including pensions, welfare, state-financed sick leave, and public-sector wages and headcount.