French Socialists Pitch Scaled-Down Wealth Tax Bill As Offer To Save Lecornu, Macron, Avert Elections 

France’s Socialist Party introduced a scaled-down version of its wealth tax proposal as a potential compromise with the ultra-fragile minority government of Prime Minister Sebastien Lecornu. The new version of the wealth tax amendment was offered during Saturday’s budget debate, delaying a critical vote until late next week. 

The Socialists insist that the tax on fortunes above 10 million euros is essential to their support for the 2026 budget. They warn that without it, they will quickly move to censure the government, triggering no-confidence votes against Lecornu. He narrowly avoided such votes recently by agreeing to suspend France’s pension reform in exchange for Socialist abstention. A renewed censure effort would likely lead to new elections and deepen political turmoil. 

The Socialists face a massive risk here: President Emmanuel Macron warned that another government collapse would prompt him to call new elections. New polling data shows that the center-left would likely perform poorly in future elections, potentially giving rise to the National Rally.

Any forced resignation of Lecornu would spark mayhem for regional markets and deepen political and economic uncertainty. Moody’s placed France on a negative outlook last Friday, largely because of its largest deficit in the euro area. The reemergence of political instability returned late last week: 

• “In Reality, It’s All Over”: French Socialists Threaten To End PM Lecornu’s Term (Again) Over Budget Showdown

On Sunday, Socialist party leader Olivier Faure appeared on local media LCI TV, indicating, ”There is no agreement yet” on a budget bill, adding, “This budget affects the vast majority of French people and it is the poorest who pay the taxes of the richest, we will not vote for it and the budget will fail.” 

Speaking on France Inter radio, economist Gabriel Zucman warned that the Socialist version of the wealth tax proposal risks leaving loopholes that wealthy taxpayers might exploit. “As soon as you introduce exemptions, you start the optimization machine,” he warned.

Last week, Budget Minister Amélie de Montchalin said that additional measures to improve tax fairness could be considered, but warned against broad changes that could violate constitutional limits.

“We will debate in the coming hours, and I truly believe a compromise is possible,” Montchalin told the National Assembly. “But I do not believe we will rewrite the tax system from top to bottom in the next few days.”

The new wealth tax vote will push the budget vote to later next week and allow more time for Lecornu’s fragile minority government to plot additional ways to avert calls for a new election. 

The latest data from the cryptocurrency-based prediction market Polymarket shows that Lecornu’s odds of being ousted are 4% between now and the end of October, but rise to 45% by year-end.

On Friday, France’s 10-year yield premium over Germany widened to 81 basis points, the highest in 10 days, according to Bloomberg data. This remains below the 89-basis-point peak during Lecornu’s resignation. This indicates that markets priced in greater uncertainty ahead of next week.

The French blue-chip CAC 40 stock index closed lower on Friday. 

Related: 

• UBS: “French Prime Minister Sebastien Lecornu Might Not Make It Until Year-End”

All eyes on French politics next week.