French President Emmanuel Macron's government is set to unveil its first annual budget tomorrow, balancing tricky priorities as it seeks to cut taxes while also slashing the deficit.
The young centrist president has pledged to find 16 billion euros (USD 20 billion) of savings next year, seeing a reduction in the deficit as key to boosting France's credibility in Europe as he eyes a shake-up of the European Union.
France is one of the few remaining nations in the EU's bad books for spending beyond the bloc's deficit limit of three percent of gross domestic product. Macron wants the deficit to come in lower than that this year for the first time in a decade.
But the former investment banker is also eyeing tax cuts for companies and families worth a total 10 billion euros, leaving his government with less cash to make up the balance.
"Its ambitions are three-fold: considerable tax cuts, higher spending in certain sectors, and bringing down the deficit," said Alain Trannoy, head of research at the School for Advanced Studies in the Social Sciences.
"That inevitably creates a tension."
Prime Minister Edouard Philippe has warned there will be tough choices, saying last month that he was "not here to be nice".
An interim budget for 2017 finalised in July included cuts to housing subsidies and defence spending which sparked a backlash from left-wingers in parliament and the head of the armed forces.
Social security is set to see a 5.5-billion-euro cut next year, according to a source close to budget preparations, while nearly 1,600 civil service jobs will be axed.
In better news for many families, some 80 percent will see their household tax reduced in a move the government hopes will increase the spending power of consumers.
Macron came to power in May promising to make France a more attractive destination for investment, starting his presidency by pushing through reforms to the country's famously complex labour laws.
"France suffers from two ills: a lack of attractiveness and a lack of competitiveness," said Geoffroy Roux de Bezieux, vice president of business lobby Medef.
The budget "essentially responds to the first problem", he said.
Macron's Socialist predecessor Francois Hollande had already pledged to bring down corporate tax from the current 33.3 per cent to 28 per cent by 2020.
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