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France's new Prime Minister, Michel Barnier, has suggested that reversing some of President Emmanuel Macron's tax cuts may be necessary to address the country's expanding budget deficit. This shift comes as international investors express concern over France's deteriorating financial situation, with borrowing costs rising to their highest level since the 2008 financial crisis.

For seven years, President Macron's strategy has centered around cutting taxes for the wealthy and corporations to stimulate economic growth. However, Mr. Barnier, recently appointed by Macron, is signaling a significant departure from this approach. He has opened the door to higher taxes on businesses and the wealthy as a measure of last resort to manage the fiscal shortfall and restore investor confidence.

France's financial alarm signals became more pronounced when borrowing costs spiked. The nation, holding Europe's second-largest economy, faces a daunting task in curbing its ballooning debt and deficit, both among the highest in Europe. Mr. Barnier emphasized the urgency over the weekend, acknowledging the worsening financial landscape and considering reversing some key tax cuts previously established by Macron. Despite Macron's earlier promises to avoid raising taxes, Barnier suggests that the wealthiest individuals and corporations might need to shoulder a part of the burden.

Since taking office in 2017, Macron has worked to make France an attractive business hub. He reduced the corporate tax rate to 25% from 33% and implemented a 30% flat tax on investment income. These policies were intended to stimulate growth but have faced criticism for increasing economic inequality and reducing government revenue. According to the Institute Montaigne, these measures have led to a loss of almost €15 billion for the French Treasury.

To navigate this fiscal challenge, Mr. Barnier needs to identify €110 billion in savings over the coming years, primarily by reducing government expenditure. Although Macron has historically opposed tax hikes, calling such measures "a very French disease," Mr. Barnier suggests that some increases are inevitable. Possible strategies include raising the flat tax to 35%, potentially generating an additional €300 million, and a temporary tax on "superprofits" from corporations, an idea previously abandoned by Macron.

Restoring the wealth tax could also be on the table, though Barnier has not confirmed this. Reviving it and closing other tax loopholes could yield €10 to €15 billion annually, according to Terra Nova. Business leaders like Patrick Martin of Medef and Rodolphe Saade of CMA CGM have indicated a willingness to discuss or contribute to tax increases if they are coupled with significant reductions in government spending.

With France facing a projected deficit of 6% of economic output in 2024 and a debt load of €3 trillion (over 110% of GDP), Mr. Barnier is under pressure to act swiftly. He is currently collaborating with political and business leaders to finalize a budget plan before submitting it to European Union officials.