Prime minister’s questions: a shouty, jeery, very occasionally useful advert for British politics. Here’s what you need to know from the latest session in POLITICO’s weekly run-through. What they sparred about: The budget. Yes, Chancellor Rachel Reeves’ second financial statement might not be until next week, but that didn’t stop Tory Leader Kemi Badenoch from having a trial run and probing Prime Minister Keir Starmer about what might, or might not, appear from the red box. Sum confusion: Badenoch unsurprisingly started on the income tax U-turn, where Reeves decided to break Labour’s manifesto promise on hiking income tax — before U-turning on that (still with us?). Why did Starmer “float increasing income tax rates only to then U-turn on it all after the actual budget?” The PM, eager to spot a gotcha, reminded Badenoch the budget was “actually next week,” but ducked the substance. To be fair: No prime minister or chancellor generally chats about the budget in public until it’s been delivered. But Reeves set a new precedent earlier this month by giving a “scene setter” speech in Downing Street, which rolled the pitch for raising income tax in all but name. Pressing the point: “We’ve read all about it in the papers,” Badenoch cried, saying this fall’s budget was the first “to unravel before it’s even been delivered.” The Tory leader interrogated Starmer on whether the freeze on income tax thresholds (a way of dragging people into higher tax bands and getting more revenue) would be extended. Cross the bingo card: The PM, eager to avoid any premature rabbits out of the hat, reiterated that the budget was next week but promised “what we won’t do is inflict a borrowing spree like Liz Truss.” Britain’s shortest-lived occupant in No. 10 continues to live in her successor but one’s head rent-free. Guessing game: Aware, er, no answer was forthcoming on the freeze, Badenoch dared to have another go. The PM was having none of that, stating she “speculates and distorts” and wished to go “back to the same failed experiment.” Badenoch threw the charge back at him, arguing, “the only people who have been speculating are his government every day for the last three months.” That’s a lucky escape for the political obsessives of all stripes across the land. Biting words: The Tory leader had one last go at getting a response on thresholds, flagging that Reeves pledged to unfreeze them in the Commons. “If she breaks such a clear promise, how can the public trust a word she says next week?” Starmer stepped aside from the specific charge, throwing back Badenoch’s time as a Treasury minister “during the worst decline in living standards on record.” Helpful backbench intervention of the week: Normanton and Hemsworth MP Jon Trickett lambasted the last government’s record on inequality and austerity, pleading with the PM to eliminate economic injustice in the budget. Starmer, pleased to receive an easy question from the often Labour rebel, happily obliged. Totally unscientific scores on the doors: Starmer 6/10. Badenoch 6/10. The exchanges were an underwhelming pre-budget joust ahead of the real action next week. The Tory leader rightly pointed out the carnage around the non-income tax rise and all but penciled in a frozen threshold extension. Starmer, naturally, kept her requests on ice and rehashed anti-Tory talking points. Whatever anyone thinks of the budget’s contents, we’ll all be glad when it’s out in the open.

Prime minister’s questions: a shouty, jeery, very occasionally useful advert for British politics. Here’s what you need to know from the latest session in POLITICO’s weekly run-through. What they sparred about: The economy. Though it’s one of the most important issues in politics, Tory Leader Kemi Badenoch’s finance-focused grilling of Prime Minister Keir Starmer was a curious choice, considering that the Home Office is facing disaster after disaster. Nevertheless: Rachel Reeves’ budget is under a month away, so speculation about what the chancellor will pull out of her red box is at fever pitch. The Tory leader asked if the PM “stood by” his promises not to increase income tax, national insurance or VAT? These, of course, were in Labour’s landslide election-winning manifesto just last year. Watch and wait: The PM, you won’t be surprised to read, skirted around the query, stressing the government would “lay out their plans” next month. “Well, well, well, what a fascinating answer,” Badenoch cried after leaping to her feet. She asked the same question in July and, back then, got a one-word answer in the affirmative. “What’s changed in the past four months?” Expectation management: Quite reasonably, Starmer said that “no prime minister or chancellor will ever set out their plans in advance.” But the PM laid the groundwork for Reeves’ pledge possibly being breached — and blaming the Tories. The economic figures, he said, “are now coming through and they confirm that the Tories did even more damage to the economy than we previously thought.” Expect this claim to be repeated. Lightbulb moment: Badenoch mentioned a number of the policies she announced at Conservative conference earlier this month. “We have some ideas for him,” she said about improving the economy, to cries of horror from Labour backbenchers, calling for the abolition of stamp duty.  “Why didn’t they do it then in 14 years in office?,” Starmer shot back, briefly forgetting he was meant to be answering the questions. Broken record: When the economy’s the topic of the day, familiar lines come out to play. The PM condemned the Tories’ record on austerity, their “botched Brexit deal,” and, you’ve guessed it, Liz Truss’ mini-budget. “We’ll take no advice or lectures on the economy,” the PM cried. “They won’t be trusted on the economy for generations to come.” The originality here is exceptional. Cross-party consensus: Badenoch ensured she wasn’t left out, claiming the last government reduced inflation and improved growth. “The truth is they have no ideas,” the Tory leader crowed, as she called for the parties to work together on welfare spending. Starmer didn’t accept that definite request in good faith, stressing that the Tories broke the economy and “they have not changed a bit.” Helpful backbench intervention of the week: Blaenau Gwent and Rhymney MP Nick Smith slammed off-road bikers running riot under the Tories and asked the PM to praise Labour’s support for the police. Starmer did exactly that. The men and women in blue have never been so grateful. Totally unscientific scores on the doors: Starmer 7/10. Badenoch 6/10. The Tory leader’s economic focus in a week when a man deported to France returned across the English Channel and a sex offender due for deportation was mistakenly released from jail for 48 hours remains an odd decision. Despite the government’s numerous economic challenges, the carnage over the U.K.’s border presented an open goal for the Tories. Though the Tory leader forced Starmer not to repeat his previous economic pledges, she wasn’t able to capitalize on that weakness — meaning no clear winner emerged.

WASHINGTON — Former Conservative Prime Minister Liz Truss thinks the Green Party might end up becoming the official opposition after the next election. In an interview with POLITICO’s Anne McElvoy for the Westminster Insider podcast, Truss said “I think there’s a certain kind of honesty about the Green Party that you don’t see in the Labour Party,” adding that people are sick of “technocratic managerial crap” in politics. The former prime minister also insisted she will not be joining Reform UK in the foreseeable future, despite criticizing her own party’s record in office. She poured scorn on both Conservative chief Kemi Badenoch’s leadership of her old party and on Labour Chancellor Rachel Reeves. Asked what she made of Reeves’ claim that Truss’ controversial mini-budget in September 2022 had contributed to Britain’s flailing economy today, making tax increases in her budget next month inevitable, Truss shot back: “I think she is a disingenuous liar. I have no time for Rachel Reeves. I don’t think she’s telling the truth about what is wrong with the British economy. I think she’s desperate … the public are now cottoning on to the fact that our country is in serious trouble.”  She also accused the Labour chancellor of having “bought the narrative of the Bank of England [about the dangers of the Truss mini-budget], which was a false narrative. Now she is being hung on her own petard.” The government has returned to the Conservatives’ economic record in preparation for a likely tax-raising budget next month, claiming this week that “things like austerity, the cuts to capital spending and Brexit have had a bigger impact on our economy than was even projected back then.”  Truss took issue with this assertion. “It is ludicrous to blame Brexit for a 30-year problem,” she said. “These arguments, like the mini-budget or Brexit or austerity, they’re just distractions from what the real problems are.” Speaking to POLITICO, Badenoch’s leadership of the Conservative Party also came in for a lengthy pasting from one of her recent predecessors. “I don’t believe the Conservative Party has come to terms with why we were kicked out after fourteen years,” Truss insisted. “What I was trying to do was shift the Conservative Party into the nationalist space. And what I faced was huge resistance from the Conservative blob who actually want to kowtow to the woke agenda. They want to be part of the transgender ideology, green climate change stuff.” Badenoch, she believes, still needs to choose more decisively “between representing places like Rotherham and Norfolk on the one hand and places like Surrey and Henley-on-Thames on the other. They haven’t chosen, and that’s a fundamental issue. And what Nigel Farage has done is he has moved into that space. That’s an existential threat for the Conservative Party.” But she had an optimistic assessment of the outlook for the Greens, reenergized under Zack Polanski’s leadership. “People don’t want this kind of technocratic managerial crap anymore. [Polanski] might end up leader of the opposition at this rate,” she said. “I think there’s a certain kind of honesty about the Green Party that you don’t see in the Labour Party … because there’s nothing for people to believe in.” Truss was speaking during a trip to Washington, D.C. and Virginia, where she met with leading figures from the conservative MAGA movement. In an extensive interview, Truss hinted, however, that her position could change when it comes to staying above the party fray. Asked how she saw Reform, she retorted: “I’m not offering my services,” even if there is a chance of bumping into its leader, Farage, who enjoys close links with U.S. President Donald Trump’s White House. However, she didn’t shut the door on some alignment with Reform: “I’m doing what I’m doing on an independent basis for now … reaching out to people, to network and to understand the lie of the land. I’m not going to say … my definite plans for the future.”  Truss resigned three years ago after just 49 days — the shortest period in office of any British prime minister. After losing her seat in last year’s general election, she has made regular visits to the U.S., attending right-wing conferences and conventions where she has praised Trump. Last week she joined a roster of Christian conservatives who support the MAGA movement. She spoke at a business summit at Liberty University in Virginia, founded by the late televangelist and conservative activist Jerry Falwell, alongside Gen. Mike Flynn, the former national security adviser to Trump, whose stump speeches described a Manichean fight between good and evil and Trump as the nation’s savior. Reflecting on the event afterward, Truss told McElvoy: “There’s a huge amount we can learn from [Trump] and what is happening in America and the MAGA revolution in the U.K. and Europe.”  Asked if she identified with the more fundamentalist view of religion and politics of the evangelical pro-Trump activists, she described her work “mission” to remake the U.K. and said:  “I think the [Church of England] needs to be restored to its former glory … it needs serious change.” Even Badenoch, who has fought “woke”  institutions and now wants to abandon the Climate Change Act, remains in hock to “modernizers” who Truss believes still control the party. But she had a positive word for Shadow Justice Secretary Robert Jenrick’s recent plan to restore the lord chancellor’s direct role in appointing judges. “I did agree with his policy on that — he’s right about it.” Liz Truss said she is “not offering services” to Reform UK, even if there’s a chance of bumping into its leader, Nigel Farage, who enjoys close links with U.S. President Donald Trump’s White House. | Neil Hall/EPA Truss remains defiant about the circumstances of her resignation as prime minister. She admitted to having been “upset to be deposed,” but was dismissive of her detractors and the jokes about her premiership being outlasted by a supermarket lettuce. “The people who joke about it or take the mick … I mean if I had been just a truly kind of mediocre, incompetent prime minister, I wouldn’t have been deposed. We’ve had plenty of those. I was deposed because people didn’t like my agenda and they wanted to get rid of me. “We’ve had years and years of pantomime personality politics, like Angela Rayner’s tax bill. And it doesn’t actually change the fact that the country is going down the tubes. And until the public and journalists understand where power and the British system actually lies and start to challenge it, start to question it … nothing will change.”

Listen on * Spotify * Apple Music * Amazon Music Under the jackhammers on Schuman, Brussels is filling back up for the rentrée — and the fault lines are showing. Host Sarah Wheaton is joined by colleagues Clea Caulcutt, Nick Vinocur and Paul Dallison to unpack a cliff-edge week: France’s confidence vote on an austerity budget that could topple Prime Minister François Bayrou and push Paris back into chaos; Europe’s next moves on Ukraine; and Ursula von der Leyen’s big address in Strasbourg on the EU’s place in a shifting world. It’s a tough speech to deliver, with few clear wins to trumpet. Plus, our resident comedian brings von der Leyen bingo back: Place your bets on how many times she will say “competitiveness.”

PARIS — French Prime Minister François Bayrou’s last-ditch attempt to woo the far-right National Rally and thereby prevent his government from collapsing came up short, party President Jordan Bardella said. “The miracle did not happen, the meeting today will not change the position of the National Rally,” Bardella told reporters Tuesday after he and Marine Le Pen met with Bayrou. Bardella said that Bayrou had crossed some of the National Rally’s red lines with the unpopular €43.8 billion budget squeeze that will be at the heart of a confidence vote on Monday. The far right believes Bayrou did not sufficiently target costs associated with immigration and European Union membership. “If the question is: Do we have confidence in this government? The answer is no, we don’t,” said Le Pen. Bayrou is holding talks with parties from across the political spectrum this week, ostensibly to find common ground. After the prime minister unveiled his plans to hold a confidence vote last week, France’s political opposition quickly said they would vote to bring down his minority government, leaving the longtime centrist little hope of survival. According to Le Pen, Bayrou already knows his government is toast. “He chose to hit the eject button, and then lead consultations. If he really wanted to talk in earnest, he would have started negotiations as early as July,” she said. Should Bayrou fall, it’s unclear how French President Emmanuel Macron will find a way out of deadlock. Opposition parties have shown little appetite for budget cuts necessary to balance France’s books and stave off growing concerns about runaway public spending in the eurozone’s second-biggest economy. The French president has already started consultations on who might replace Bayrou as prime minister, according to several of his allies. “He’s trying to walk a tightrope” and find a new prime minister who can get a budget through parliament and not get toppled, said one person close to Macron. Several names have started circulating in the French press, including Defense Minister Sébastien Lecornu, Justice Minister Gérald Darmanin and Economy and Finance Minister Éric Lombard. But on Tuesday, Le Pen dampened early hopes of a compromise with any future prime minister backed by the French president. “It’s the Emmanuel Macron’s policies that are toxic,” she said. Bayrou’s successor would have to “break” with Macron, she said, if he wanted to survive for any length of time.

Public spending cuts ain’t austerity, French Prime Minister François Bayrou argued on Thursday in his latest push to save his minority government from collapsing. “This is not austerity, it is a slowdown in additional [public] spending so that the country can recover,” he told a conference organized by France’s largest employers’ association, MEDEF. Bayrou’s speech was the latest stop on his blitz public relations campaign to convince voters that their elected representatives who plan to take down his government over an unpopular €43.8 billion budget squeeze are making a major mistake. “We are living in a critical moment in our national history,” Bayrou said. “Our heritage, the landscapes we have inherited, and the cultural wealth of our country, are under threat. Every business and every family is threatened by the decline of our public finances.” Bayrou on Monday announced he would hold a confidence vote on Sept. 8 to seek parliament’s approval to forge ahead with his slimmed down budget for next year. The spending plans are designed to rein in the budget deficit and assuage French creditors, financial institutions and ratings agencies concerned by the country’s unsustainable levels of public spending. Opposition lawmakers, however, have already come out against the longtime centrist and said they would use the vote to bring down his government. In the days that have followed, the prime minister has taken to the airwaves to convince voters directly of the need to balance France’s books and express an openness to negotiation — so long as his political opponents agree on the need for drastic action. “These proposals [to cut public spending] are all open for discussion and can be amended, provided that they do not undermine the outcome of the necessary effort that needs to be made,” Bayrou said. During his speech Bayrou hit back at his critics, saying “they have it all wrong” and are actually working against securing a prosperous economy for the next generation. “We are accepting that [young people] are being enslaved by having them spend decades repaying loans that were so lightly contracted by previous generations,” he said. The prime minister and his allies have warned that without a course correction, the eurozone’s second largest economy could face a debt crisis on the level of the one that rocked the European Union in the 2010s. “Just look at the example of all the countries around us — Spain, Portugal, Italy, not to mention Greece — which had to make unprecedented sacrifices to get their public finances back on track,” he said.

BERLIN — A looming €30 billion hole in Germany’s federal budget for 2027 will pose a major challenge to the coalition government led by Chancellor Friedrich Merz, Finance Minister Lars Klingbeil warned on Wednesday. The 2027 budget “will place massive demands on us in government,” Klingbeil said in Berlin. “This will be one of the biggest domestic policy challenges we have to tackle in the next twelve months.” Germany’s previous left-leaning government led by former Chancellor Olaf Scholz collapsed due to budget constraints and massive disagreements on spending in November, setting the stage for the February snap election that ushered Merz and his conservatives to power in a coalition with the center-left Social Democratic Party (SPD). In order to avoid a similar fate, Merz — before even taking office — moved to pass landmark legislation loosening Germany’s so-called debt brake, overturning years of self-imposed fiscal austerity and allowing for massive spending on defense while unlocking €500 billion in borrowing for infrastructure. But despite that legislation, a major budget gap still looms, forcing Merz’s government to make tough spending decisions in the next several months. “There’s no time to lose now,” said Klingbeil, a leader of the SPD. “Everyone in the cabinet will have to save. There’ll be a strict consolidation course, which I also demand of everyone.” Klingbeil, who also serves as vice chancellor, proposed a combination of measures to close the 2027 budgetary gap. He said the German economy must grow more rapidly to increase revenue while, at the same time, the government reassesses subsidies. The €30 billion gap projected for 2027 is due to increased interest rate payments and to new coalition spending on measures such as the “mothers’ pension” — a benefit that grants additional retirement credits to parents who spent time raising children instead of working — Klingbeil said. Even if the necessary cuts are found, the coalition’s spending crunch is not likely to end in 2027. The government will have to close a budgetary gap of approximately €172 billion by 2029, according to the finance ministry.

PARIS — Prime Minister François Bayrou appeared to be signing his own political death warrant when he told the French this week that he would take away their holidays, freeze their welfare and cut billions from their health care. Right on cue, the far-right National Rally of Marine Le Pen and hard-left France Unbowed of Jean-Luc M´elenchon fulminated that it was time to topple Bayrou because of his plan to squeeze the budget by an eye-watering €43.8 billion. But as the smoke cleared it became clear there was method to the madness of the veteran centrist. Bayrou is staking out a maximalist position — a high opening bid — from which he hopes to negotiate a budget deal in the fall. He is warning, after all, that Paris risks a Greek-style meltdown unless the parties can see reason and balance the books. Fundamentally, he is also making an important political calculus about his adversaries — including Le Pen’s National Rally. With Le Pen eyeing the presidency in 2027, the far-right party may now be more reluctant to be perceived as a wrecker rather than a sober political force willing to act in the national interest. While many in Le Pen’s party would like to force new elections, Bayrou is calculating she will ultimately back off because she herself would be unable to stand for office due to a fraud conviction. Sprinkled through his budget address were bargaining chips for talks with parties across the political spectrum. Lawmakers won’t formally debate the proposals until after the summer break, when the government will need the tacit support of at least one opposition group to pass its budget bill. That leaves plenty of time for Bayrou to massage mainstream parties into supporting him. HOLIDAY HOAX If one announcement touched a nerve more than others it was Bayrou’s plan to scrap two holidays — potentially Easter Monday and Victory in Europe Day on May 8. The proposal shocked even his own camp. Some opposition leaders realized they were probably being played. The head of the Greens, Marine Tondelier, initially questioned Bayrou’s decision to eliminate the May 8 holiday but later told the LCI news network it was “a trap, a red herring,” and noted that Bayrou could reverse course in the haggling over the budget. The head of the Greens, Marine Tondelier, initially questioned Bayrou’s decision to eliminate the May 8 holiday but later told the LCI news network it was “a trap, a red herring,” and noted that Bayrou could reverse course in the haggling over the budget. | Julien Mattia/EPA France’s hung parliament, which was born of last year’s snap election, is deeply fragmented and is roughly divided into three blocs: the far right, a centrist bloc affiliated with President Emmanuel Macron, and the left bloc. None of them command a majority of votes, meaning the two extremes need to gang up against the government in order to topple it.  Bayrou’s predecessor, Michel Barnier, tried unsuccessfully to negotiate his government’s survival with Le Pen’s National Rally.  Bayrou opted for a different strategy and clinched a temporary deal last winter with the Socialists (the most moderate group in the left alliance) to keep his government afloat and pass this year’s budget.   The government is seemingly pursuing the same strategy this time round, with Economy Minister Éric Lombard telling Bloomberg that a deal was “probably more likely” with the Socialists.  The National Rally also needs a solid argument to rock the boat, and the government isn’t going to hand them one. Shortly after the budget plan announcement, the government landed a rebate on the EU budget, a longtime demand of the National Rally. “We want to appear reasonable, and we are also aware that we might inherit the situation tomorrow,” a party official, who was granted anonymity to speak candidly, said ahead of the budget announcement.  SOCIALISTS’ DILEMMA The key question, though, is which way the Socialists will jump. Naturally, they mauled Bayrou’s two-hour austerity budget pitch as “unfair,” “brutal” and “unacceptable.” The party’s parliamentary group said: “As things stand, censuring the government is the only perspective.” Strong stuff, but the Socialists tellingly stopped short of joining France’s other left-wing forces — the Greens, France Unbowed and the Communist Party — in calling for Bayrou’s immediate resignation.  Since Bayrou’s appointment last year, the party of François Hollande and François Mitterrand has oscillated between fierce opposition and uneasy compromise. This time is no different: harsh words, but no definitive break.  “We could eventually reach an agreement not to vote for a motion of no-confidence,” said Socialist lawmaker Philippe Brun, who leads the party’s budget negotiations. “But for that to happen, the government will need to significantly rework its proposal.” After a decade of electoral disaster, the Socialists have clawed their way back to relevance, challenging the dominance that Mélenchon’s France Unbowed has built over the left in the past decade.  After a decade of electoral disaster, the Socialists have clawed their way back to relevance, challenging the dominance that Jean-Luc Mélenchon’s France Unbowed has built over the left in the past decade. | Mohammed Badra/EPA But the party is now deeply divided. About half want to chart a moderate course, while the rest are pushing to align with the broader (but more radical) left. If Bayrou is forced out, Macron could call snap elections, reopening a bitter internal debate over potential alliances on the left. And it’s unclear how eager the center-leftists would be to jump back into campaign mode without first mending their internal rifts.  Also hinting at room for a negotiated compromise, Socialist group leader Boris Vallaud said his party would present an alternative plan ahead of the parliamentary budget debate. “There is not just one path,” he posted on X. So, how many concessions can the Socialists extract from the government — and where are their red lines?  There’s a glimmer of hope that Bayrou and the Socialists could align on pursuing the rich. Despite pressure from the center and the right to avoid tax hikes, the government has opened the door to a “solidarity contribution” from the country’s highest earners. A similar mechanism was included in this year’s budget and involved a 3 percent to 4 percent tax hike on annual incomes above €250,000 for individuals and €500,000 for households. Bayrou also vowed to slash ineffective tax breaks. Other parties sense the Socialists could end up folding. “There has to be some sort of a deal with the Socialists” that explains the shock measures unveiled by Bayrou, National Rally lawmaker Jean-Philippe Tanguy told POLITICO after the budget presentation.  That vague promise of wealthier French citizens contributing more could indeed become a bargaining chip — though the Socialists say nothing is guaranteed, and doubt how far Macron’s allies will go in confronting the wealthy. “We’re asking for an actual conversation,” said party leader Olivier Faure on BFMTV. “For now, there’s only one golden rule guiding this government: Never touch the ultra-rich.”  BAYROU’S ALLIES PLAY IT COOL When presenting his Draconian plan, Bayrou acknowledged he wasn’t certain he could count on his own coalition allies — a big risk. But his allies have so far been the only ones not to slam the plan, knowing a constructive attitude could earn them concessions during summer talks.  The right-wing Les Républicains (LR), part of the coalition supporting Bayrou, recognized some of the merits of his plan, especially on cutting spending. During a Wednesday morning cabinet meeting, Emmanuel Macron lauded Bayrou’s move “for the virtue of courage, boldness and lucidity,” as government spokesperson Sophie Primas put it. | Pool photo by Ed Jones via EPA On Wednesday, Laurent Wauquiez, who leads LR lawmakers in the National Assembly, acknowledged that the budget “has the merit of looking for solutions” although it could still be “corrected and improved.”  A similar message came from Macron’s camp, which supports the overall plan but is also planning to suggest some tweaks. During a Wednesday morning cabinet meeting, Macron lauded Bayrou’s move “for the virtue of courage, boldness and lucidity,” as government spokesperson Sophie Primas put it. Former Prime Minister Gabriel Attal, who now heads Macron’s party, welcomed Bayrou’s plan, in particular his promise to look at reforming France’s unemployment benefits. In a social media post Attal acknowledged that his party’s position “is without doubt not very popular,” but slammed opposition parties as “irresponsible.” That doesn’t mean, however, that all Bayrou government supporters are OK with the €43.8 billion budget cut. Another former prime minister, Édouard Philippe, who has already launched a bid to run in the next presidential election, was one of the most critical voices from the center-right camp. “It has the merit of being a contingency plan. But it also has its limitations,” Philippe told Le Parisien newspaper. “Almost nothing in what [Bayrou] proposed solves” the structural problems that fuel the country’s deficit, he added. France’s political landscape is certainly highly divided, but that also means there are deals out there for Bayrou to strike.  

Donald Trump’s trade war is forcing Ireland to confront the fragile foundation of its economic miracle. One economist saw it coming. In the summer of 2024, just after taking up an economic advisory role to Ireland’s government, Stephen Kinsella, professor of economics at the University of Limerick, warned that the next crisis wouldn’t be homegrown — it would come from Washington. “The most obvious source,” he said, “would be the election of Donald Trump.” If Trump moved to block U.S. multinational investment in Ireland, the shock, he said, would make Ireland’s earlier period of austerity “look like an episode of the Care Bears.” Within months, Kinsella’s prediction began to materialize. Trump returned to the White House. He publicly called Ireland a “tax scam” and launched a trade assault that threatened the Irish exports of American pharmaceutical giants like Pfizer. Meanwhile, the EU — eyeing retaliation — has considered targeting big tech firms also based on the island, such as Apple, and reviewing services imported from the U.S. From every angle, Ireland’s unusually buoyant economy suddenly looked exposed. This has much to do with Ireland’s recent economic success being linked to the fortunes of U.S. multinationals. Such corporations, many of them with market valuations exceeding Ireland’s own GDP, employed an estimated 620,000 people across a workforce of 2.9 million in 2024, according to Ireland’s National Statistics Office. Even more stark: Just 10 international corporations account for over half of all corporate tax receipts — and they make up more than a third of total Irish government revenue. “It’s the highest reliance on corporate income among developed countries,” said Aidan Regan, political economy professor at Dublin’s University College and a vocal critic of the Irish model. The risk is not just economic slowdown, but a systemic shock. As Kinsella told a business podcast: “We are an economy that is very strangely structured, a beautiful freak.” And: “To lose the top three biggest, most concentrated players [would] basically wipe us out.” Kinsella declined to be interviewed for this story because of his government advisory role. But his analysis is shared by many including the country’s Fiscal Council, a statutory body set up to monitor Irish fiscal policy. DISAPPEARING WINDFALL In April, the Fiscal Council warned the government not to use corporate windfalls to fund permanent spending, because of the risk they could “easily disappear.” The source of these Irish corporate revenues is no mystery. What appear to be pharmaceutical exports or imports of digital services are in substance the effects of massive U.S. firms shifting their profits to Ireland, via intangible assets like intellectual property. Dublin is also lobbying hard within the EU to shield U.S. firms. | Mairo Cinquetti/NurPhoto via Getty Images The data tells the story. Corporate tax receipts began surging in 2015, following OECD-led reforms that curbed some abuses elsewhere but left key loopholes intact. As a result, many companies chose to anchor their royalty-generating assets in Ireland, where the tax on such income is a minuscule 6.25 percent. According to EU Tax Observatory research, Ireland is still leads the global rankings for corporate profit shifting. “Ireland is both in a very privileged position and a very precarious position,” Regina Doherty, a former Irish government minister who is now a member of European Parliament with the center-right European People’s Party, told POLITICO last month. Her party, Fine Gael, has been part of coalitions that governed Ireland through a series of shocks, including the post-2008 financial crisis, Brexit, and the pandemic — but the Trump shock may be the most serious of them all. “Certainly [this] is the most challenging time that I can remember in my political and adult career,” Doherty said. To guard against potential vulnerabilities, Irish officials have scrambled since Trump came to power to build relationships with U.S. state governors and congressional figures, hoping to soften Washington’s stance. When Taoiseach Micheál Martin met Trump in the Oval Office in March, he leaned on talking points from the Irish American Chamber of Commerce, describing the U.S.–Ireland relationship as a “two-way street.” Ireland is now the sixth-largest investor into the United States — a fact increasingly invoked as evidence of a balanced partnership. But Dublin is also lobbying hard within the EU to shield U.S. firms. Doherty warned that introducing a bloc-wide digital tax would be “incredibly damaging for the Irish economy” and said Ireland would “continue to advance that view with EU partners.” The EU is negotiating to avoid tariffs, including on sectors such as pharmaceuticals which Ireland’s corporate revenues depend on. But it is also considering a tax on digital firms to get more revenues for its own budget. FORTRESS IRELAND Even as it defends U.S. multinationals abroad, Ireland is scrambling to fortify its economy at home. Speaking at the Global Ireland event last month, Frances Ruane, chair of the National Competitiveness and Productivity Council, said that dealings on the U.S. front require patience — but at home, they “need to move more quickly.” Ireland, she said, must invest in infrastructure and scale its indigenous economy, particularly energy grids and data centres, if it’s to ensure its economic miracle does not go to waste. Ruane also called for expanding R&D tax credits for domestic firms and for tapping into new common strategic EU funding programs. “What really matters is that the small countries make sure their voice is heard so that this does not become a concentration,” she said, referring to the risk of larger countries capturing the lion’s share of EU support. At the same event, Martin echoed this push, unveiling new bilateral strategies for deepening ties with Germany and France. Still, he stressed that “even if others step back, Ireland will continue to engage” with the U.S. “at all levels.” Whether that strategy is enough to shield Ireland from a global reordering of corporate geography remains to be seen. Back in Dublin, however, the domestic political class has been absorbed by other matters — like a parliamentary feud over whether pro-government independents can ask questions during sessions with the Taoiseach. Meanwhile, the underlying model of Ireland’s prosperity is beginning to wobble. On the surface, the island’s economy continues to perform at an incredible growth rate. In the first three months of the year, it notched up a massive 9.1 percent rise in GDP, according to the country’s statistics agency. But the figures may be misleading. Economists and even Irish Finance Minister and Eurogroup President Paschal Donohoe say the effect was largely due to large multinationals rushing through exports to front-run Donald Trump’s April 2 U.S. tariff announcement. When the distorting effects of multinationals are stripped out of official data, the quarterly growth rate comes in at a decidedly more modest 0.8 percent, according to official figures. “It frustrates me to see what our political system is doing while Trump is unleashing an existential threat to the future prosperity of the Irish economy,” said Jim Power, an independent economist. “I’m hoping that the gravity of the threat to the Irish economy will drive policy in a better direction.”

PARIS — French Prime Minister François Bayrou plans to present the main elements of a budget for 2026 on Tuesday comprising spending cuts and tax hikes so unpopular they could spell the end of his minority government. Bayrou is trying to trim the budget by at least €40 billion to bring down the country’s eye-watering €3.3 trillion in public debt and rein in a budget deficit that has fallen afoul of European rules in recent years. “We will not allow the deficit to accumulate,” Bayrou said in a primetime television interview Thursday. “For the first time in a very long time … the government is going to say what the constraints are, what efforts are needed, and what decisions must be taken to get us out of this deadly trap.” The budget Bayrou will present is expected to achieve those savings mostly through spending reductions. Though the exact proposals have not been shared publicly, they are almost certain to draw the ire of opposition lawmakers across the political spectrum. Bayrou was able to pass a budget for 2025 earlier this year that contained €53 billion in spending cuts and tax hikes, but only after promising to launch retirement reform talks that temporarily appeased the center-left Socialist Party. Those negotiations collapsed last month, precipitating a major rift between Bayrou and the Socialists. The prime minister can now no longer count on the center left to abstain from voting on a no-confidence motion in a show of tacit support. Though the far-right National Rally has held off on joining recent efforts to topple the government, it has made clear it is ready to do so when Bayrou presents his fleshed-out budget in the fall. “This budget will be a moment of truth,” said a French minister who was granted anonymity to freely discuss negotiations. “Finding €40 billion in savings is difficult, of course. It’s like climbing the Himalayas from the north face in winter and wearing shorts. But this effort is indispensable.” BUDGET FREEZE Bayrou is stuck in an unenviable position between lawmakers staunchly opposed to unpopular budget cuts and investors who want to see France get its finances in shape. Paris is set to dole out €67 billion on interest payments this year — more than it will spend on defense. Though France’s credit rating has not been downgraded this year, the yield on the country’s 10-year bond has crept well over 3 percent in 2025 and in recent days has been higher than that of Cyprus, Portugal and Spain — meaning financial markets view Europe’s second-biggest economy as a risker investment than those other countries. Bayrou has promised to bring France’s budget deficit down from 5.8 percent of gross domestic product in 2024 to 5.4 percent this year as part of the government’s plan to ratchet the figure down to 3 percent of GDP, as required by European Union rules, by 2029. Economy and Finance Minister Eric Lombard and Budget Minister Amélie de Montchalin have already sent proposals to Bayrou, which include several options to achieve the €40 billion in savings. The duo has proposed to reduce the scope of some existing tax breaks and to freeze the value of certain benefits paid out by the government that are typically adjusted for inflation. François Bayrou is stuck in an unenviable position between lawmakers staunchly opposed to unpopular budget cuts and investors who want to see France get its finances in shape. | Pool photo by Tom Nicholson/EPA But without a majority in the National Assembly, Bayrou will likely be forced to pass his spending plans using a constitutional back door that allows him to pass legislation without a vote but, in turn, gives lawmakers the power to put forward motions of no confidence. Bayrou’s predecessor Michel Barnier was ousted last year when trying to use the tool to pass a budget of his own. The hard-left France Unbowed, which has repeatedly tried to topple Bayrou’s government, said it will once again try to do so if it puts forward what one of its lawmakers called “an austerity policy.” “It is absolutely not the budget that we need,” the lawmaker, Éric Coquerel, told POLITICO. Coquerel, who is the president of the National Assembly’s finance committee, said France should be looking at investments rather than spending cuts amid the trade war with the United States. He said he hopes that with municipal elections coming up in 2026 and then both legislative and presidential elections set for 2027, the Socialists will decide it is politically expedient for them to oust Bayrou. “If the Socialist Party saves Macronism, I think they’ll have an absolutely terrible electoral backlash,” Coquerel said. Nicolas Barré contributed to this report.