PARIS (Reuters) -French Prime Minister Francois Bayrou is expected to use a speech on Tuesday to lay out the contours of a deal to dilute pension reforms in return for support from the left on passing a budget.
The speech, due at 1400 GMT, comes after a tumultuous 2024 for France when President Emmanuel Macron shocked the nation by calling early elections, only to lose his working majority in parliament just as the public finances went off track.
Bayrou's government, which was formed last month after the collapse of his predecessor's administration, is trying to win assurances from some opposition parties - the Socialists in particular - that they will not vote against its 2025 budget.
The Socialists, who voted down the previous budget proposals in December in conjunction with far-right lawmakers and precipitated the fall of Michel Barnier's government, have made concessions on the 2025 pension reform a condition for support.
They have long chafed against Macron's pension reform, one of his main legislative achievements. The measure raised the minimum age to draw a full pension to 64 from 62 to save 17 billion euros a year.
It was still unclear before the speech whether a deal could be reached. Talks at the finance ministry last week between Finance Minister Eric Lombard and left-wing leaders appeared to have made progress.
On Tuesday morning Socialist party leader Olivier Faure, who met with Bayrou on Monday evening, said he was "serene" about a possible deal.
"We may be a few steps away from a possible deal," Faure told BFM TV, adding his party made a new proposal to Bayrou last night after the meeting, whose details he declined to disclose.
Bayrou's entourage has declined to give much away but told Reuters the content of the speech, in which he will set out to parliament the government's direction, would take into account his talks with party leaders and unions.
However, the fragmented, hung parliament delivered by voters in last June's snap legislative elections remains, and there is no certainty Bayrou will be able to please enough of the unruly lawmakers to survive longer than his predecessor.
Having decided to make concessions to the left to avoid being at the mercy of Marine Le Pen's far-right, he may anger conservative and centrist lawmakers who fear the cost of any pensions compromise.
"Francois Bayrou mustn't lose on his right what he gains on his left," William Thay, head of French political think-tank Le Millenaire told Reuters.
"Suspending the pension reform risks tensing up his base, in particular the Macronistas," he said.
Undoing parts of the pension reform could spook investors, who have already shown signs of nervousness over France's large budget deficit.
Macron, who offered a mea culpa in his New Year address over the political instability created by his surprise decision to call snap elections, has warned the French needed to work more, not less. However, he is no longer the ultimate decision-maker.
(Writing by Michel Rose; additional reporting by Dominique Vidalon Sybille De La Hamaide; Editing by Toby Chopra and Christina Fincher)
By Elizabeth Pineau and Michel Rose