As the man tasked with maintaining European unity during Brexit talks, Michel Barnier earned a reputation as a formidable negotiator.
However, while that process was tough, the newly-appointed French prime minister may be facing his most brutal task yet as he scrambles to fix the country’s finances.
To do so, he must plug a budgetary gap while balancing demands from both Brussels and Paris.
On one side, he is under pressure to push through EU-imposed budget cuts, while on the other he is running a minority government opposed by parties demanding more spending.
To solve this dilemma, Barnier has opted for what he deems the path of least resistance: taxing the rich.
The prospect of “targeted levies” on France’s wealthiest households was laid bare by Antoine Armand, Barnier’s new finance minister, on Thursday.
He said that pressing ahead with such an unpopular policy was necessary given that France faces “one of the worst deficits in our history”.
According to the latest figures, Paris’s budget deficit climbed from 4.8pc in 2022 to 5.5pc in 2023 – despite the government’s pledge to lower borrowing.
And as tax revenues struggle, it appears that the country’s fiscal mess will only get worse before it gets better.
Laurent Saint-Martin, the budget minister, told parliament as such on Wednesday as he spoke “truthfully” about the dire state of France’s finances.
“The truth is that in 2024, the public deficit risks exceeding 6pc of gross domestic product according to the latest estimates we have,” he said.
Such warnings have fuelled concern in Brussels, where policymakers have placed France into the excessive deficit procedure, a process by which the government has to submit proposals showing how it will get borrowing back under control.
France has already asked for two delays to submit these proposals, which has caused alarm across financial markets.
This has been reflected in French borrowing costs, as the government is now paying a higher rate of interest than Spain on certain bonds, having previously overtaken those of Portugal during the summer general election.
In practice, this means Emmanuel Macron’s France is deemed a riskier bet than countries bailed out during the Eurozone crisis.
Unsurprisingly, Barnier is worried: “Our country is in a very grave situation – €3 trillion [£2.5 trillion] of debt and €50bn in interest to pay a year,” he said recently.
“A lot of our debt is on international markets – we must preserve France’s credibility.”
Claus Vistesen, at Pantheon Macroeconomics, says it is imperative that Barnier reduces France’s debt pile, or markets will jack up borrowing costs further, driving up the interest bill.
“France is now in a slow-motion Liz Truss situation,” he says. “The cat is out of the bag. You have got to give the EU and markets some plan to get the deficit down.”
However, it is not yet entirely obvious how Barnier will be able to make a dent in the government’s eye-watering debt pile.
Leo Barincou, at Oxford Economics, says there are few signs that economic growth will be the saviour, meaning that vast sums must be found from higher taxes or lower spending.
“The adjustment that is needed to meet EU fiscal rules or just to stabilise the debt as a share of GDP is of the range of €100bn,” he says.
“France is not very good at conducting fiscal adjustments. There is no clear path, politically, to where you can get that money.”
It is this quandary that has prompted Barnier to consider higher taxes on the wealthy, as well as French businesses.
That is despite the fact that wealth levies have never raised more than 0.25pc of GDP, according to the OECD, which is the equivalent of around €6bn per year.
“There could be a wealth tax and there could also be a tax on companies that made exceptionally high profits in the past few years,” says Barincou. “But for all of these taxes we are talking a few billion euros, max, so it is not the right order of magnitude.”
Other possibilities include copying Britain’s stealth tax model by freezing income tax thresholds, says Vistesen, dragging workers into higher tax bands.
Yet underpinning these approaches will be inevitable opposition from the Left and Right.
Marine Le Pen’s hard-Right National Rally has already declared its desire to lower the state pension age from 64 to 62, while also proposing a bill to reverse a raft of money-saving measures introduced by Macron.
Meanwhile Jean-Luc Melenchon, hard-Left leader of the other main bloc in the French parliament, has held rallies against what he calls the “government of the general election losers”, which he said should be brought down “as soon as possible”.
It means any attempt to seriously tackle what Barincou calls “bloated expenditure” risks a political battle.
“We have a divided parliament,” he says. “We have a centre-Right government that will only remain in power as long as the far Right is willing to let it remain in power.
“If the government starts to implement painful spending cuts, especially for social spending, things will get messy politically, and spark protests. It is far from certain the far Right would agree to very unpopular measures on social spending and pensions.”
Macron’s government can force through the spending plans by decree but analysts believe this could trigger a vote of no confidence in the government.
However, should Barnier survive, Vistesen anticipates some form of EU can-kicking to grant the prime minister some much-needed breathing space.
This could be done by extending the deadline for France to lower borrowing to an acceptable level by 2029, rather than 2027 as expected.
“This is the game we always play,” says Vistesen. “We kick the can down the road.
“If the other parts of the plan are credible, it is very difficult for the EU to say no to a country saying it needs more time.”
However, even so, France’s fiscal problems may be so severe that not even a tax raid on the rich may move the dial.
“The problem for France is that no one – not even their own fiscal watchdog – believes France will be able to cut spending to the extent needed to bring the deficit down,” says Vistesen.
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