PARIS, Dec 19 (Reuters) - France's 2026 budget faces a make-or-break moment on Friday as lawmakers scramble to avert a fiscal deadlock in last-ditch talks to agree a compromise bill.
A joint committee from both the National Assembly and the Senate is to meet to hammer out a final budget text that would then be put to votes in both houses on Tuesday.
Failure would force Prime Minister Sebastien Lecornu to seek emergency legislation to allow spending, tax collection and borrowing in the new year until a proper budget can be agreed.
Investors and ratings agencies are scrutinising France's finances as Lecornu struggles to rein in a budget deficit running at 5.4% of output this year - the euro zone's highest.
The minority government insists the budget must keep the fiscal deficit to less than 5% next year, having already given ground on its original target of 4.7% with costly concessions to win over Socialist lawmakers.
The Senate approved a 2026 budget on Monday with a fiscal deficit of 5.3% after conservatives blocked tax hikes to offset a bigger than planned funding shortfall in the social security budget that the lower house had approved.
Ahead of Friday's talks, Socialists in the lower house demand that the wealthy pay more while conservatives say they will reject tax hikes.
Even if a deal emerges on Friday, it could still be torpedoed in a vote before the lower house, which has the final say.
In that case too, the government would likely submit an emergency rollover law to avoid a U.S.-style shutdown, before reviving more permanent budget legislation early next year.
Lecornu's minority government has little room to manoeuvre in France's fractious parliament, where budget battles have already toppled three governments since President Emmanuel Macron lost his majority in a 2024 snap election.
(Reporting by Leigh Thomas, editing by Ed Osmond)
