Explainer-How France's 2027 budget battle could play out

PARIS, Oct 20 (Reuters) - French Prime Minister Sebastien Lecornu's minority government faces a particularly treacherous budget season as opposition parties dig in for a fight over his deficit-cutting plans before an April-May presidential election.

The government is struggling ‌to rein in its strained finances, with protesters demanding more money for underfunded public services at a time when borrowing costs ‌have risen to their highest since 2022 on the bond market.

Here's how the budget battle could play out:

The budget bill is being reviewed in the lower house of ​parliament, where it is having a rough ride. A vote on the taxation side of the bill was due on Tuesday, but has been pushed back to October 27 because a large number of amendments still need to be discussed.

Budget Minister David Amiel has warned that amendments already approved would worsen the budget deficit by €10 billion ($11 billion).

The constitution grants lawmakers 70 days to debate and amend it, first in the lower house and then ‌in the Senate before it returns to the lower ⁠chamber for a final vote.

However, the bill is unlikely to reach that point if opposition parties hold firm against Lecornu's plans for €54 billion in budget savings.

That means the government will likely have to consider other options ⁠to pass the budget.

RETURN OF ARTICLE 49.3?

Since a 2024 snap legislative election produced a hung parliament, successive minority governments have leaned on Article 49.3 of the constitution to force through budgets without a vote.

However, opposition parties can respond with threats of a no-confidence motion, forcing the government to make concessions — typically to Socialists, ​centrists ​or conservatives — to survive. With political parties already positioning for 2027, there may ​be little appetite to compromise this time.

If a no-confidence vote ‌is held and the government defeated following a 49.3, the budget bill would be dropped and the next cabinet forced back to the drawing board.

If no budget passes after the 70 days, and the government doesn't invoke 49.3, it could pass an emergency law rolling over the 2026 budget until a proper one can be passed after the election.

But the new president is expected to dissolve parliament and call fresh elections, meaning a full 2027 budget might not pass until well into the second half of the year, just as work begins on ‌the 2028 budget.

A finance ministry report warned such a rollover would cause unprecedented ​budget paralysis, freezing investment and planned defence-spending increases while welfare costs keep climbing.

The deficit ​could widen by at least half a percentage point, denting ​investor confidence and pushing up borrowing costs, it said.

If the government survives past mid-December without a ‌budget law, it could try passing one by ordinance, bypassing ​parliament entirely on the state's most ​important annual legislation.

This has never been done in the Fifth Republic, and legal experts view it as a nuclear option likely to trigger a no-confidence vote. Unlike the 49.3 route, the fall of a government afterwards wouldn't automatically void a budget passed by ​ordinance.

Macron would likely struggle to install a new ‌government before the election, however, leaving Lecornu's cabinet in a caretaker role. In practice, an ordinance budget would probably serve ​as a stopgap until a new government wins parliamentary backing for its own fiscal plan late in 2027.

(Reporting ​by Leigh Thomas; Editing by Hugh Lawson, Richard Lough and Andrew Heavens)