France's Barnier announces targeted tax hikes to plug budget deficit

Prime Minister Michel Barnier announced steep public spending cuts and targeted tax hikes for France's biggest companies and wealthiest individuals on Tuesday, saying there was no other way to narrow a gaping budget deficit.

Barnier, appointed last month, faces the challenging task of plugging a huge hole in public finances at a time when the fragmentation of parliament and infighting in his minority government will make it hard to push through reforms.

France's credibility with its European Union partners and in financial markets is at stake after its borrowing costs surged.

"The real sword of Damocles hanging over us is our colossal financial debt," Barnier, a 73-year-old former minister and EU commissioner, told lawmakers as he set out his government's plans, ignoring heckles from the hard-left France Unbowed.

France's deficit was making it weaker in Europe, he added.

Tax increases would be targeted and temporary, he said, without giving further details. The dire state of public finances meant there was "no other choice".

According to Le Parisien newspaper, Barnier was considering tax hikes of 15 to 18 billion euros ($17-20 billion), including 8 billion euros in increased corporate taxes as well as an additional levy on energy companies and share buybacks.

Barnier, best known abroad for being the EU's Brexit negotiator, said he would reduce the budget deficit - which could top 6% this year - to 5% by the end of 2025 but would have to push back the target date for reaching the euro zone's common 3% deficit goal to 2029 from 2027.

ING economist Charlotte de Montpellier said Barnier had been too light on detail to know if the timeline for cutting the deficit was credible and questioned whether the tax hikes would be temporary.