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France must cut spending to tackle deficit, urges state auditor

Pierre Moscovici warns politicians not to rely on taxes in race to agree budget for 2026

France’s politicians must shift their focus from raising taxes to spending cuts to tackle the country’s deficit, the head of the state auditor has warned, as politicians struggle to agree on a 2026 budget.

Tax debates in parliament have dominated recent budget discussions, leaving little room for debate on public spending, with the government potentially adding to France’s vast expenditure by suspending President Emmanuel Macron’s pension reforms until 2027.

Pierre Moscovici, head of the Cour des comptes, told the Financial Times that the pendulum needed to swing back if France is to trim its deficit to an EU-imposed target of 3 per cent of its output by 2029.

“To achieve a satisfactory public finance trajectory, the focus must be primarily on savings and spending, and secondarily on taxation. Yet I observe that the entire budget debate is doing exactly the opposite,” Moscovici said in an interview.

The Cour des comptes audits all aspects of public spending in France, including recently admonishing the Louvre for prioritising investing in artwork over security, after the theft of France’s crown jewels last month.

Moscovici’s warning comes as France enters final negotiations to pass a budget by the end of the year.

Failure to do so would not be a “catastrophe” but “France would miss its trajectory [to reduce the deficit by 2029] and stay on a spiral of increasing debt and debt loads, which will gradually prevent it from investing”, the former Socialist finance minister added.

In France, public spending made up 57 per cent of GDP in 2023, the most of any major European economy. The country’s deficit is the third highest in the EU, after Romania and Poland, and is expected to be 5.4 per cent in 2025. France’s high debt-to-GDP ratio has led to reprimands from Brussels and a series of credit downgrades from rating agencies.

Since legislative elections in June 2024 created a bitterly divided National Assembly, successive governments have struggled to find consensus on public finances, with proposals to cut spending proving particularly unpopular.

Michel Barnier was swiftly ejected as premier last year after two-thirds of his budget measures focused on reducing state spending — including cutting teaching staff — while his successor François Bayrou also failed to win backing for proposals including cuts to medication subsidies.

Prime Minister Sébastien Lecornu has suggested reductions in medical subsidies, ministerial spending and keeping a lid on regional spending as well, but he is primarily pulling fiscal levers to negotiate a compromise budget that would reduce the deficit to roughly 5 per cent of GDP in 2026.

Lecornu needs backing from the centre-left Socialists to survive and pass his budget, which opened the floodgates in recent weeks to a series of new tax proposals, including levies on the biggest companies.

But the initial rejection of fiscal measures in a vote last month meant parliament was unable to debate spending measures.

If deputies fail to reach an agreement the government will probably propose a special law by December 19 to roll over the 2025 budget and avoid a US-style shutdown.

But this is an imperfect solution, which does not allow for any new spending measures, such as Macron’s desire for a €6.5bn rise in defence spending over the next two years.

“The special law is the status quo. In terms of public finances, in a period of transformation, that’s never good. That’s the reason I personally would clearly prefer that a budget is passed,” Moscovici said.

Moscovici said France’s prospects of having a budget would come down to whether parties saw more political benefit from providing economic stability or avoiding compromise with opponents: “In terms of rationale, it’s purely political now.”

Parliament’s ability to reach a deal is still in doubt, with Macron’s former premier Edouard Philippe this week endangering the social security bill that would suspend the pension reform by saying his 34 deputies could not vote for the text.

As France prepares to take over the G7 Presidency in 2026, Moscovici said the country was “far from a financial crisis” but its struggles to reduce its debt load could lead to France being “relegated” on the world stage. “We can’t claim to be a leader if we are not exemplary,” he said.

The rise of humanoid robots threatens political disruption

Our delighted faith in the automatons raises the question of how they will integrate into human society

For over half a century, the International Robot Exhibition (IREX) has served visitors an exquisitely balanced cocktail of pragmatism and prophecy. The missing component, all of a sudden, is politics.

The biennial trade show, held since 1974 in perennially robot-fixated Japan, is first and foremost a showcase of industrial automation — the no-nonsense factory and farm machines that have steadily proliferated. Globally, according to the International Federation of Robotics, companies installed well over half a million of these in 2024; 54 per cent in China, which has, non-coincidentally, spent over a decade as the world’s biggest producer of industrial robots.

But the tone and pizzazz of IREX has always been provided by the humanoids. It’s a somehow thrilling spectacle to see robots that look a bit like us, sort of doing things we can do, with the half plea, half promise that they will do so much more — and better — in the indefinite future. 

By instinct, Japan has led the world in delighted faith in these humanoids, adopting an endlessly patient parental view that, however expensive, immature, incompetent and work-shy the automatons may appear now, the little darlings will eventually grow up and take their place in society. 

Societies, meanwhile, seem wholly unprepared for this graduation, and the political sphere has not even begun to have the sort of debates that may very soon be forced upon it.

That needs to change urgently. For two glaring reasons the 2025 IREX, which opened in Tokyo yesterday, felt fundamentally different from its predecessors. The first arises from the nature of the technological progress made since 2023, and the predictions clustered in the background. 

Artificial intelligence has advanced rapidly, and appears — to the most optimistic eyes — poised to fill gaps that humanoid service robots have demonstrated in their long stumble towards usefulness. The focus is now less on their physical limitations (although those are steadily falling away), and more on how effectively they can be deployed as vectors for the visibly less limited competencies of AI. 

Analysts advising investors on the megatrends of the coming year are hot on the humanoid trail. In a research note, Macquarie analyst Daisy Zhang wrote that 2026 would mark an “inflection year” for humanoid robots and their worldwide commercialisation. Zhang forecast annual humanoid robot sales to hit 50,000 units next year, rising to 1.1mn units a year in 2031. By 2034, she wrote, the “humanoid robot penetration rate” — the number of robots per 10,000 human factory workers — would exceed the rate for industrial robots.

In a research note last week, analysts at Morgan Stanley proclaimed that the transition to “embodied AI” marked a pivot in history, forecasting a global humanoid robot market worth $5tn by 2050 and a deployment rate of one machine for every 10 humans. Investors should be very cautious; the history of robots reveals an industry capable of creating a mismatch between promise and reality.

The second striking aspect of IREX 2025 was that, while Japan is still a big player in industrial robots, the robot enthusiast baton has been passed to China, which now dominates in humanoids. The Unitree H2, the AgiBot G2, the UBTech Walker S2 — name the android striding towards humanity, it is Chinese. Even Tesla’s imminent Optimus Gen 3 is estimated to mostly comprise Chinese parts.

The looming political problem here, closely entwined with AI, is that if the inflection point prophecies for humanoid robots are even half correct, labour markets, economic balances, cultural norms and a great deal more face stunning disruption. The phrase “Freedom from work”, as the slogan for one Chinese roboteer goes, may sound alluring; mass unemployment, for which it may turn out to be a euphemism, less so.  

The intriguing possibility is that, while China may have emerged as the great robot-maker, Japan is wealthy enough and robot-friendly enough to become one of the first big democracies to experiment with widescale humanoid robot adoption. 

In theory, some argue, Japan’s shrinking population and strained labour force will create less resistance to mechanised replacements for humans. It needs them, and many may actively prefer steel and semiconductors to foreigners and work visas.

But when a robot-engendered crisis arises, the political world needs a way to talk about the new arrivals. The temptation will be to frame this in the same terms as the immigration debate — all the more so if the humanoids are identifiably foreign in their manufacture. That remains to be seen. Robophobia, though, has every chance of emerging as a legitimate, vote-winning political position.

ECB urges Giorgia Meloni’s party to rethink declaring Italy’s gold ‘belongs to the people’

Any law affecting legal status of gold reserves would risk Bank of Italy’s independence, warns central bank

The European Central Bank has urged Italian Prime Minister Giorgia Meloni’s party to “reconsider” a plan to declare that gold reserves held by the country’s central bank belong to the Italian people.

In an opinion released on Wednesday, the ECB warned that any law that could affect the legal status of Italy’s gold reserves would require consultation with the Bank of Italy to ensure that it does not compromise central bank independence.

Italy has the third largest gold reserves of any country, after the US and Germany, with around 2,452 tonnes. Its current market value of about €285bn follows a blistering rise in global gold prices.

The gold — which is stored in Italy, the US, the UK and elsewhere — is currently on the balance sheet of the Bank of Italy, which manages the stock as part of Italy’s official foreign reserves.

But senior lawmakers from Meloni’s Brothers of Italy party are pushing for a provision in the upcoming budget law to declare that “the gold reserves managed and held by the Bank of Italy belong to the Italian people”, a move that critics fear could pave the way for a potential sell-off of some of Italy’s gold. 

“It is not clear to the ECB what the concrete purpose of the draft provision is,” the ECB said in its opinion. “The Italian authorities are invited to reconsider.”

Italy’s finance ministry had sent the draft budget amendment last week to the ECB for official review. 

In its response to Rome’s query, the ECB said the EU treaty governing management of the single currency — and the reserves behind it — does not use “the concept of ownership” but instead “only deals with the dimension of exclusive holding and management of the reserves”.

EU treaties give European central banks, including the Bank of Italy, full independence to manage their countries’ gold reserves, including the right to buy or sell gold outright, the ECB noted.

In turn, member state governments “undertake to respect this principle” and promise not to “seek to influence members of the decision-making bodies of the national central banks”, the ECB said.

It said any transfer of gold reserves from the Bank of Italy’s balance sheet to the public accounts would also be prohibited, echoing its ruling when a similar proposal came up in 2019.

“If the Italian authorities consider it necessary to clarify the legal ownership of the gold reserves, then the Bank of Italy must be consulted in order to ensure that treaty requirements — and in particular the independence of the Bank of Italy — will continue to be fully respected,” it said. 

In a response to the ECB opinion on Wednesday, Brothers of Italy lawmakers — who insist they have no intention of touching the country’s gold reserves — slammed the “alarmism” surrounding their proposal to affirm public ownership of the reserves.

“It reaffirms a normal principle: namely that the gold reserves are the property of the Italian people,” parliament member Francesco Filini said on Wednesday. “The Brothers of Italy amendment is clear: it does not in any way call into question the autonomy of the Bank of Italy.”

Opposition parties, including the Democrat Party, say Brothers of Italy is raking up the issue to try to distract public attention from a worsening squeeze on the cost of living and the country’s sluggish economic growth. 

The government is racing to pass a budget before the end of the year, but Senator Lucio Malan, one of the proposal’s backers, said Meloni’s cabinet might take up the issue and try to draft a law that would satisfy the ECB.

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