Economy

With French public finances increasingly out of control, the 2025 budget bill seeks to squeeze 60 billion euros in savings via tax hikes and spending cuts. The aim is to cut the deficit to 5% of economic output next year from over 6% this year. Lacking a majority in the deeply divided parliament, Prime Minister Michel Barnier told L’Ouest France newspaper last week that he did not see how the budget could be passed without invoking article 49.3 of the constitution.The 49.3, famously used by the previous government to push through President Emmanuel Macron’s pension reform against a backdrop of street protests, allows the text to be adopted without a vote – but usually also triggers a no-confidence motion against the government.Barnier’s weak coalition is propped up by the far-right National Rally (RN), which could join forces with the left to topple his government, making the 49.3 a risky option for him.So far, Barnier has decided to let parliament go through the movements of reviewing and debating the budget before he calls time in order to give lawmakers the impression he is not riding roughshod over their role as legislators.But with a vote on the overall budget scheduled for Dec. 12, Barnier’s patience may be wearing thin. Below is a run-down on the state of France’s budget negotiations.WHERE DOES THE BUDGET LEGISLATION STAND?In an unprecedented move for modern France, a majority of lawmakers in the lower house of parliament rejected the government’s 2025 budget bill last week after leftist lawmakers heavily revised the legislation.A left-wing alliance, which has the single biggest block of seats but falls far short of a lower house majority, had added 75 billion euros ($79 billion) in new tax hikes to the bill.Budget Minister Laurent Saint Martin described the additional tax burden as unacceptable “Frankenstein” legislation that would violate the constitution and EU fiscal rules alike.The rejection means the Senate will begin its review of the government’s original, unamended bill on Monday Nov. 25. ahead of the final vote on Dec. 12.WHAT WILL HAPPEN NOW?Senate finance committee chair Claude Raynal has said the upper house, where Barnier’s conservatives have the most seats but fall short of a majority, would likely make fewer changes to the bill than the lower house.After the senate vote, a panel of lawmakers from both houses will then have to try to agree on a new version of the bill, but with little time for sweeping revisions.As that version would likely be rejected again in the full lower house, the government will then have little choice but to invoke article 49.3 of the constitution to ram the budget through without a vote.WHAT ARE THE CONSEQUENCES OF BYPASSING PARLIAMENT?Left-wing lawmakers in the lower house have said they would then trigger a vote of no-confidence against the government, which could potentially bring it down if it passes.To survive, Barnier needs the far-right RN to abstain from the vote. While some RN lawmakers have brandished the threat of not cooperating, its head Jordan Bardella has said the decision will depend on whether the final cut of the budget reflects their demands.The RN will also have to make a political calculation about whether it gains anything from triggering a political crisis as new legislative elections cannot be held before next summer.Still, a recent request by prosecutors for RN leader Marine Le Pen to face an obligatory five-year ban from politics for her alleged role in embezzlement of EU funds may cause the RN to reassess its loyalty to propping up Barnier’s administration, some analysts have suggested. Le Pen denies the allegations.($1 = 0.9489 euros) More

BOGOTA (Reuters) -Colombia will need a budget adjustment of 56 trillion pesos ($12.7 billion) to comply with its fiscal rule this year, an independent committee of experts said on Tuesday.The Andean country may also require a budget adjustment of 39 trillion pesos ($8.8 billion) in 2025, a report from the Autonomous Fiscal Rule Committee (CARF) said.Colombia’s government has already made cuts to its 2024 budget amid fiscal difficulties, and has been weighing further measures, including a possible 33 trillion peso trim.The finance ministry in June announced a cut worth 20 trillion pesos due to lower than expected income.The CARF already warned in July that Colombia could need additional adjustments to comply with the fiscal rule in 2024 and 2025 due to possible risks to tax collection goals, despite previous government announcements.The fiscal rule was created in 2011 to impose policy constraints meant to block deterioration of public finances. To comply with the rule in 2024, the government would have to keep debt at 55.3% of GDP, rising to 56.4% of GDP in 2025. More

Ukraine plans to spend 2.22 trillion hryvnias ($53.7 billion), or about 26% of its gross domestic product, on defence and security next year, officials said. More

If approved, the agreement would bring the total amount disbursed to Ukraine under the program to $9.8 billion, the IMF statement said, adding that the board was expected to review the deal in coming weeks. “The outlook remains exceptionally uncertain and Russia’s war in Ukraine continues to take a heavy toll on Ukraine’s people, economy, and infrastructure,” the funds’ staff wrote, adding that despite those challenges the program “remains on track.” “The economy has continued to show resilience despite the devastating challenges arising from Russia’s war in Ukraine, which has now lasted 1,000 days,” it added. “However, risks remain exceptionally high given uncertainty on the intensity and duration of the war, including from the continued attacks on energy infrastructure.”IMF staff, which met with Ukrainian officials Nov. 11-18, said the country’s real GDP growth was expected to be 4% this year but slow to 2.5%-3.5% in 2025 amid energy infrastructure damage and labor shortages.Inflation in Ukraine also reached 9.7% year-over-year in October over rising food and labor costs “but inflation expectations remain well anchored,” IMF staff concluded. More

SATARA, India (Reuters) – Indian Prime Minister Narendra Modi has taken several pro-farmer but inflation-stoking measures in recent months, such as easing curbs on rice and onion exports, but that may not prove enough for him to sway an election on Wednesday in a key state. Maharashtra, which includes the city of Mumbai, is a major grower of sugarcane, soybean, cotton and onions, but opinion polls – which have a patchy record in India – suggest Modi’s alliance may struggle to retain the local legislature as farmers say they have yet to benefit from the recent measures.An opinion poll by Lok Poll, covering more than 86,000 people in Maharashtra, showed last week that a coalition of opposition parties including Congress could wrest back the state with up to 162 of the 288 seats. It said low prices for crops such as soybean and cotton were a factor.Other surveys have also said the BJP alliance could lose. Votes will be counted on Nov. 23.Modi’s Bharatiya Janata Party (BJP) lost its parliamentary majority in national elections held between April and June partly due to farmers’ anger with the export curbs, which they felt prioritised Indian consumers above growers by keeping domestic prices low.In that national election, opposition parties won two thirds of the parliamentary seats in Maharashtra.”We faced a setback during the parliamentary elections because of the restrictions on onion exports,” senior BJP leader and Maharashtra deputy chief minister, Devendra Fadnavis, told an election rally on Sunday.”We have now lifted those curbs and Prime Minister Narendra Modi’s government will not impose export bans abruptly.”India has removed export restrictions on rice and onions, and raised the tariffs on imported edible oil in a bid to help local growers of mustard and soybean get better prices at home.TOO LATEBut farmers say the steps have come too late, as they had already harvested and sold their produce like onions to traders, who are now benefiting from a surge in domestic prices.Retail inflation soared to its highest level in 14 months in October, partly due to high prices of edible oils, onions and tomatoes.”When we were selling onions in March and April, the government didn’t allow exports,” said farmer Mahesh Gore in Maharashtra’s Nashik district.”We were forced to sell onions at 10 rupees per kg. If they had allowed exports then, we could have got double the price. Now prices are at 50 rupees, but only traders are benefiting.”In recent years, India restricted onion exports whenever wholesale prices rose above 20 rupees.Other farmers say they are not getting a good price for crops like soybeans because of a global glut now.Mahesh Khade said he was barely getting 3,900 rupees per 100 kg now for soybeans compared with 4,600 rupees a decade ago. Prices of diesel, fertilisers, and other inputs have more than doubled in the same period.”They have ignored farmers’ interests,” Khade said, adding he would switch sides now and vote for the opposition.The BJP did not respond to requests for comment.($1 = 84.38 rupees) More

BERN (Reuters) – Switzerland said on Tuesday it was concerned by U.S. President-elect Donald Trump’s proposals to raise tariffs and is considering how to respond if his new administration does so.Trump aims to shift the aggressive trade agenda from his first term into higher gear with across-the-board 10% tariffs on imported goods and even higher levies on imports from China.That could hurt the export-oriented Swiss economy, which has the United States as its biggest market, experts say. Around a fifth of Swiss exports of goods currently go to the United States, customs data shows, making the country a more important market for Switzerland than Germany, China or France.”Switzerland is concerned about Donald Trump’s announcement to impose additional tariffs on all goods imported in to the U.S.” a spokesman for the Swiss State Secretariat for Economic Affairs (SECO) said on Tuesday.”Switzerland clearly rejects the plans,” they said of the proposals, adding they contravene the rules-based international trading system which is crucial to the Swiss economy.SECO said Bern was examining “sensible responses” and seeking discussions with the relevant U.S. authorities, as well as counterparts in Germany, France, Italy and the EU.SECO did not give details on what responses were being considered, although Switzerland’s leeway could be restricted after it scrapped all industrial tariffs this year.Currently the U.S. has low single-digit tariffs on the import of industrial goods, with many Swiss industrial exports to the U.S. duty-free.While experts and central bankers in Europe have warned about the damage from rising trade barriers, governments have so far been cautious on how to respond on Trump’s plan.Economists have estimated that Swiss economic output could be reduced by 1% if severe amplification effects like a trade war broke out or companies started relocating to avoid tariffs.The Swiss pharmaceutical industry, manufacturers of machinery, appliances, precision instruments, watches and foodstuffs, for example, would suffer significantly from higher tariffs, economists at the ETH university in Zurich have warned.Other countries have also warned about fall-out from tariffs, with Bundesbank President Joachim Nagel saying earlier this month that Germany’s economy could lose 1% in economic output. More

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