French lawmakers pass emergency rollover budget law

PARIS, Dec 23 (Reuters) - French lawmakers passed emergency legislation on Tuesday to keep the state running in January until a proper 2026 budget can be approved by the deeply divided parliament.

Prime Minister Sebastien Lecornu rushed to submit the legislation late on Monday after lawmakers from both houses failed on Friday to hammer out a compromise 2026 budget text over divisions about spending cuts and tax hikes.

The law, which was adopted unanimously in the lower house and in the Senate, allows the state to roll over 2025 spending limits into the new year and to collect taxes and issue debt.

"It will allow us to collect taxes and run public services from January 1," Lecornu said in an address to the nation on Tuesday evening ahead of the Senate approval.

Investors and ratings agencies are scrutinising France's finances as Lecornu struggles to rein in a budget deficit running at 5.4% of national output this year - the highest in the 20-nation euro zone.

Lecornu's minority government has little room for manoeuvre in the fractious parliament, where budget battles have already toppled three governments since President Emmanuel Macron lost his majority in a 2024 snap election.

The prime minister said he will now focus with his cabinet and the different political parties on negotiating a full budget for next year with a budget deficit under the equivalent of 5% of GDP.

France used emergency rollover legislation last year until a proper 2025 budget could be passed in February, which the government says cost 12 billion euros ($14 billion).

($1 = 0.8488 euros)