PARIS — French Prime Minister (PM) Francois Bayrou proposed scrapping two public holidays and freezing most public spending as part of a €43.8-billion ($50.88-billion) budget squeeze he outlined on Tuesday.

Mr. Bayrou’s plan involves freezing welfare spending and tax brackets in 2026 at 2025 levels, not even adjusting for inflation, which was immediately criticized by left-wing and far-right politicians. Defense spending, however, will increase.

France saw its budget deficit hit 5.8% of gross domestic product (GDP) last year, nearly double the official European Union (EU) limit of 3% of GDP, as a political crisis left four successive governments paralyzed and incapable of tackling an unexpected drop in tax income and surge in spending for a second year.

“Everyone will have to contribute to the effort,” Mr. Bayrou said in a two-hour news conference with journalists, lawmakers and ministers, warning that public debt was a “mortal danger” for France and needed to be tackled head on.

The welfare spending freeze will likely be as unpopular for many voters as scrapping two public holidays — possibly Easter Monday and May 8, which commemorates the end of the Second World War in Europe.

There are simply too many public holidays in May, and the French must get back to work that month, Mr. Bayrou said, adding that this would mean several billion euros in additional revenues for the state, as everybody would work more and produce more.

“This government prefers to attack the French people, workers and retirees, rather than root out waste,” far right National Rally leader Marine Le Pen said on X.

“If Francois Bayrou does not revise his plans, we’ll vote for a motion of no confidence against him.”

Left-wing parties were also damning. The Socialists leader Oliver Faure, whose party helped Mr. Bayrou pass the 2025 budget, said: “This isn’t a recovery plan it’s a demolition plan for the French (social) model.”

Mr. Bayrou, a veteran centrist politician, must persuade the opposition ranks in France’s fractured parliament to at least tolerate his cuts, or risk facing a no-confidence motion like the one that toppled his predecessor in December over the 2025 budget.

Any risk of a no-confidence motion would likely only firm up once a detailed budget bill goes to parliament in October.

MACRON’S LEGACY
President Emmanuel Macron has left Mr. Bayrou the task of repairing the public finances with the 2026 budget, after his own move to call a snap legislative election last year delivered a hung parliament too divided to tackle the country’s spiraling spending.

If he fails, a new political crisis could trigger more credit ratings’ downgrades and drive up the cost of interest payments, which are already set to become the single biggest drain on the budget at over 60 billion euros.

In the final two years of his second term, the dramatic deterioration of the public finances, which has left France with the biggest budget deficit in the euro zone, may tarnish Mr. Macron’s legacy.

Then a political outsider, he was first elected in 2017 on promises to break the right-left divide and modernize the euro zone’s second-biggest economy with growth-friendly tax cuts and reforms.

Successive crises — from protests, COVID-19 and runaway inflation — have shown he has failed to change the country’s overspending habit, however.

Mr. Bayrou aims to reduce the budget deficit from 5.4% of GDP this year to 4.6% in 2026, ultimately targeting the EU’s 3% fiscal deficit limit by 2029.

“It’s the last stop before the cliff, before we are crushed by the debt,” Mr. Bayrou said on Tuesday. — Reuters

NEW YORK — President Donald J. Trump’s renewed calls for US Federal Reserve Chair Jerome Powell’s resignation have prompted investors to protect portfolios against the risk of higher inflation, as a central bank more willing to lower interest rates could fuel price rises and make lenders demand higher compensation to hold bonds.

While a Fed chief more friendly to cutting rates could be mixed for equities in the short term, it would translate into a weaker US dollar, increased volatility in the Treasuries market and higher longer-term rates, meaning more expensive borrowing costs for mortgages and corporate bonds.

Since returning to the White House in January, Mr. Trump has repeatedly railed against the Powell-led Fed for not cutting interest rates, feeding concerns that Mr. Trump aims to put the Fed under his thumb.

Even JPMorgan Chief Executive Officer (CEO) Jamie Dimon on Tuesday warned of the unintended consequences of that, saying central bank independence was sacrosanct.

If market participants perceive that Fed independence is eroding, moves in financial assets could be wild, some analysts say. One of the top risks is that investors will sell Treasury bonds, lifting interest rates on longer-term maturities in the US debt market relative to short-term securities.

“If markets believe that a politically-captured Fed will lower rates to stimulate growth regardless of economic consequences, long-term inflation expectations will rise, causing the curve to steepen,” said Guy LeBas, chief fixed income strategist at asset manager Janney Capital Management.

“It’s impossible to be confident in the magnitude of the move, but my guess is it’ll be large — possibly measured in percent increases in 30-year Treasury yields, not basis points.”

The minutes from the Fed’s June 17-18 meeting, which were released last week, showed little support for a cut at the central bank’s July 29-30 meeting, as most policymakers remain concerned about the inflationary risks that Mr. Trump’s import tariffs could pose.

Even so, Mr. Trump has said Mr. Powell’s resignation “would be a great thing.” The president, who cannot fire the Fed chief over a monetary policy dispute, and his administration have publicly called for Mr. Powell’s exit or for rates to be cut on multiple occasions this month.

“While short-dated yields could fall in this scenario based on a faster pace of Fed rate cuts moving forward, longer-dated yields would likely recalibrate higher for stickier inflation and rising term premia based on the erosion of institutional trust,” said Chip Hughey, managing director of fixed income at Truist Advisory Services.

Bond investors are pricing in increased price pressures in the inflation market over the next few years. Breakeven inflation as indicated in the US five-year Treasury Inflation-Protected Securities hit 2.476% late on Monday, a three-month high.

In a recent escalation of criticism of Mr. Powell, the White House is probing cost overruns in the renovation of the Fed’s historic headquarters in Washington.

The questioning has intensified concerns among market participants over risks that the Trump administration will try to fire Mr. Powell for cause, perhaps the only legal path for it to do so. US Treasury 30-year yields on Tuesday topped 5% for the first time since late May, as investors fretted about the country’s huge fiscal deficit and assessed the risk of Mr. Powell’s exit from the central bank.

A Fed spokesperson pointed to Mr. Powell’s previous statements. The Fed chief, who was appointed by Mr. Trump during the president’s first term in the White House, has repeatedly said he has no plans to leave his post as head of the US central bank before his term expires on May 15, 2026. Mr. Powell’s seat on the Fed’s Board of Governors extends to Jan. 31, 2028.

The White House did not immediately respond to a Reuters request for comment.

“I still see the risks as fairly minimal, but higher than they were a week or two ago,” said Matt Orton, head of market strategy at Raymond James Investment Management. Mr. Orton still favors a diversification away from Treasuries and into gold, as well as both high-quality value and growth equities. “The risk-reward for me in Treasuries right now just isn’t there.”

ON THE HUNT
While the odds of Mr. Powell being ousted or resigning are viewed as low, analysts see some chance that Mr. Trump could nominate someone for the job early to influence monetary policy through a “shadow” Fed chief.

US Treasury Secretary Scott Bessent said earlier this month the Trump administration is focusing now on finding a replacement for Mr. Powell this fall.

Morgan Stanley said in a note that the risk of a shadow Fed chief is a less relevant question at this point.

“Until Powell’s term is up, though, the bigger risk to our Fed forecast is our economic forecast… where we remain quite humble,” Seth Carpenter, Morgan Stanley’s chief global economist, wrote.

Although market participants see the risk of weakening the central bank’s independence as low, many investors are increasingly incorporating this prospect into their portfolios.

JPMorgan CEO Jamie Dimon pointed to those risks in an earnings call on Tuesday, saying: “The independence of the Fed is absolutely critical, and not just for the current Fed chairman, who I respect, Jay Powell, but for the next Fed chairman.”

“Playing around with the Fed can often have adverse consequences, absolutely opposite of what you might be hoping for,” Mr. Dimon added.

George Bory, chief investment strategist for fixed income at Allspring, said the asset manager has been positioning for steeper yield curves, in line with an environment of future rate cuts and growing budget deficits.

“That strategy of positioning for a steeper yield curve over the coming months and quarters seems to make a lot of sense. It’s justified economically, the technicals support it, and then the political landscape also,” he said.

If stocks could get a boost from lower rates initially, the pressure from higher long-term rates would cast a shadow over them, investors say.

Jack Ablin, chief investment officer at Cresset Capital, said US equities would “probably be OK, but I think that it would likely continue to accelerate the trend of global investors moving capital away from the US.”

“Once investors question the independence of the Fed, it just becomes a less stable monetary environment,” Mr. Ablin said. — Reuters

SEATTLE — The deadly Air India crash last month has renewed a decades-old debate in the aviation industry over installing video cameras monitoring airline pilot actions to complement the cockpit voice and flight data recorders already used by accident investigators.

One of the industry’s most influential voices, International Air Transport Association head Willie Walsh, a former airline pilot, said on Wednesday in Singapore there was a strong argument for video cameras to be installed in airliner cockpits to monitor pilot actions to complement voice and flight data recorders already used by accident investigators.

Aviation experts have said a preliminary report from India’s Aircraft Accident Investigation Bureau (AAIB) raised questions over whether one of the pilots of Air India flight 171 cut off fuel to the Boeing 787’s engines seconds after takeoff, leading to an irrecoverable situation.

The crash in Ahmedabad, India, killed 241 of the 242 people aboard, as well as 19 people on the ground.

As of now, “based on what little we know now, it’s quite possible that a video recording, in addition to the voice recording would significantly assist the investigators in conducting that investigation on the issue of mental health,” Mr. Walsh said.

Advocates for cockpit video cameras say the footage could fill in gaps left by the audio and data recorders, while opponents say concerns about privacy and misuse outweigh what they argue are marginal benefits for investigations.

Video footage was “invaluable” to Australian crash investigators determining what led to Robinson R66 helicopter breaking up in mid-air in 2023, killing the pilot, the only person aboard, according to the Australian Transport Safety Bureau’s (ATSB) final report, which was released 18 days after the Air India crash.

The video showed “the pilot was occupied with non-flying related tasks for much of this time, specifically, mobile phone use and the consumption of food and beverages,” the report said.

The ATSB commended Robinson Helicopters for providing factory-installed cameras and said it encouraged other manufacturers and owners to consider the ongoing safety benefits of similar devices.

In 2000, US National Transportation Safety Board (NTSB) Chairman Jim Hall urged the Federal Aviation Administration to require commercial airliners be equipped with cockpit image recorders.

Mr. Hall’s recommendation came in the wake of 1999’s Egyptair Flight 990 crash, when the first officer intentionally crashed the Boeing 767, according to the NTSB, killing all 217 people on board.

“In the balance between privacy and safety, the scale tips toward safety, unequivocally,” air safety expert and former commercial airline pilot John Nance said. “Protecting the flying public is a sacred obligation.”

Another aviation safety expert, Anthony Brickhouse, said that as an accident investigator, he is in favor of cockpit video, but acknowledged that commercial pilots have real concerns.

Video on Air India flight 171 “would have answered lots of questions,” he said.

Air India declined to comment. India’s AAIB, which is expected to release a final report within a year of the crash under international rules, did not reply to request for comment.

PILOT OBJECTIONS
US pilots’ unions such as the Air Line Pilots Association (ALPA) and Allied Pilots Association (APA) say the voice and data recorders already provide enough information to determine the cause of a crash and that the cameras would be an invasion of privacy and could be misused.

Calls for cockpit cameras are an understandable reaction to “the stress of not knowing what happened immediately after an accident,” said APA spokesperson Dennis Tajer, an American Airlines pilot.

“I can understand the initial reaction of the more information, the better,” but investigators already have enough data to adequately determine an accident’s cause, leaving no need for cameras, he said.

To make flying safer, current safety systems should be enhanced to record higher-quality data, rather than adding video cameras, an ALPA spokeperson said.

There are also concerns the footage could be used by airlines for disciplinary actions or that video could be leaked to the public after a crash, said John Cox, an aviation safety expert, retired airline pilot and former ALPA executive air safety chairman.

A pilot’s death being broadcast on “the 6 o’clock news is not something that the pilot’s family should ever have to go through,” he said.

If confidentiality can be assured around the world, “I can see an argument” for installing cameras, Mr. Cox said.

Cockpit voice recordings are typically kept confidential by investigators in favor of partial or full transcripts being released in final reports.

Despite that, International Federation of Air Line Pilots Associations (IFALPA) said it was skeptical that confidentiality could ever be assured for cockpit videos.

“Given the high demand for sensational pictures, IFALPA has absolutely no doubt that the protection of (airborne image recorder) data, which can include identifiable images of flight crewmembers, would not be ensured either,” the organization said in a statement.

Boeing declined to disclose whether customers are able to order cockpit video recorders, while Airbus did not reply to request for comment. — Reuters