France's caretaker government freezes 2025 spending at current levels

PARIS (Reuters) - France's caretaker government has set 2025 state spending at current levels, saving about 10 billion euros ($11.08 billion) after taking inflation into account and keeping the deficit reduction target on track, the prime minister's office said.

President Emmanuel Macron has yet to name a new government since a snap legislative election in early July produced a hung parliament, leaving the current government to draft a budget that will likely be modified - possibly deeply - by its successor.

Outgoing Prime Minister Gabriel Attal sent 2025 spending limits to each ministry on Tuesday, keeping overall state spending at 492 billion euros, unchanged from this year's budget law, an official in Attal's office told journalists.

That implies budget tightening of about 10 billion euros because normally spending would be allowed to increase at least as much as inflation, the official said. Moreover about 20 billion euros in emergency spending cuts this year are also to be rolled over in 2025.

"The prime minister is particularly mindful about restoring the public finances," the official said, adding it was necessary if France is to stick to the outgoing government's target of cutting the overall public sector budget deficit to less than 3% of output by 2027.

As a first step, the current government had aimed to cut the budget deficit from an estimated 5.1% of gross domestic product this year to 4.1% in 2025, but the official said it was too early to say if that target would be retained as the social spending budget was still being prepared.

Military spending would be one of the rare budgets to increase next year, while spending on employment support would be reduced as unemployment is relatively low, the official said.

Macron is due to meet with party chiefs on Friday with a view to name a prime minister who will be tasked with forming a coalition government, whose first major challenge will be passing a budget before year-end in a deeply divided parliament.

($1 = 0.9024 euros)

($1 = 0.9022 euros)

(Reporting by Leigh Thomas and Elizabeth Pineau; Editing by Sharon Singleton)