(Bloomberg) -- The European Union is set to admonish France for breaking the bloc’s deficit and debt rules, triggering a process that can lead to onerous fines and complicating campaign priorities less than two weeks before voting starts in legislative elections.

The EU rules include strict measures for nations with debt higher than 60% of gross domestic product and a budget deficit of more than 3%. France’s deficit was 5.5% last year, with debt at about 111% of GDP.

The indebtedness will limit the next government’s ability to implement a range of promises that may include lowering tax revenue or undoing market friendly pension reforms. Emmanuel Macron — along with Marine Le Pen of the far-right National Rally — will also be wary of doing anything that further spooks markets, which have been in turmoil since the president called the snap election a week ago.

“Financial markets would be the limits to what the National Rally plans to do,” Famke Krumbmüller, EMEIA leader of geostrategy at EY, said Tuesday. “Whoever will be in power will be constrained by how the financial markets react to their program.”

France isn’t alone in making the so-called excessive deficit procedure list due to be announced Wednesday. A person familiar with the matter told Bloomberg on Tuesday that it will also include Italy and another five countries. Still, Spain and three others who breached the 3% limit escaped. 

The EU reprimand is set to occur just as the French campaign enters a pivotal moment, with the National Rally on course to take 32.7% of the vote, according to Bloomberg’s poll of polls ahead of elections on June 30 and July 7. The left-wing New Popular Front, which includes Socialists, Communists, Greens and the far-left France Unbowed, is expected to get 26.3%. That puts Macron’s Renaissance party and its allies in third place.

The two groups best positioned to form a government after the snap election — the New Popular Front and National Rally — have signaled a more confrontational approach to both spending and taking on Brussels than Macron.

“We’re opposing the austerity budget proposed by the EU,” Communist Party head Fabien Roussel told Franceinfo radio on Wednesday. “We’re refusing these rules.”

He said the New Popular Front plans additional spending on healthcare, security, justice and other needs, as well as increased taxes on the most wealthy.

Socialist Party leader Olivier Faure reiterated on RTL radio that the alliance would scrap Macron’s pension reform and “do what public finances allow.”

Valerie Rabault, a Socialist candidate and former budget recorder, told Les Echos newspaper she estimates the New Popular Front’s program would lead to new spending of €106 billion ($114 billion) through 2027, a move that would further exacerbate France’s excessive deficit. 

An all-out dispute with Brussels would have disquieting parallels with the euro-zone debt crisis, when the currency was brought to the brink as investors panicked over standoffs between EU institutions and heavily indebted governments.

Since then, the EU has bolstered its crisis-fighting toolkit, with the European Stability Mechanism bailout fund and the European Central Bank formalizing conditions under which it could step in to calm markets with bond buying. Still, the central bank would only activate such asset purchases for countries with “sound and sustainable fiscal and macroeconomic policies.”

Speaking on the eve of the EU’s decision, Bank of France Governor Francois Villeroy de Galhau repeated his call to avoid deepening budget deficits.

Respecting our fellow citizens “means recognizing the demands of reality, and not increasing even further heavy deficits that we cannot finance well,” he said. 

Le Pen, who once campaigned to pull France out of the euro, has not yet detailed her program. Party leader Jordan Bardella has touted measures that would strain the deficit further, with few details on the revenue the National Rally expects from spending less on immigration policies, combating tax fraud and cutting transfers to the EU. 

Meanwhile, the parties in the New Popular Front have united around an election manifesto that includes freezing prices of essential consumer goods, raising the minimum wage, and rejecting the austerity constraints of the EU fiscal rules. 

Even so, once in power the parties would likely have to tone down their rhetoric and avoid policies that would worsen relations with the EU, in a manner similar to Italy’s anti-migration prime minister, Giorgia Meloni, Krumbmüller said. 

France was already facing difficulties controlling its budget deficit after tax receipts disappointed. Before Macron called the election, his government was working on emergency spending cuts of around €20 billion this year and more than that again in 2025. 

He managed to briefly bring the budget deficit below the EU limit shortly after he was first elected president in 2017, but massive spending during the Covid pandemic and energy crisis drove it markedly wider. His government still promises to get back under the 3% threshold by 2027 after a forecast of 5.1% this year.

The country’s debt, also according to the government’s long-term plans, will peak at 113.1% of GDP next year before declining to 112% in 2027.

There are no easy political solutions to repairing the deficit. Macron had limited his options by insisting on a mantra of not increasing taxes to preserve investment and job creation, but economic growth has been sluggish since the inflation surge. Spending cuts have also proven a thorny issue, with both the National Rally and the left leading a backlash against plans to remove costly energy subsidies introduced in the crisis.

Last month, S&P Global Ratings downgraded France, highlighting missed goals in the government’s deficit-reduction plans. After Macron called snap elections, Moody’s said the potential political instability is a credit risk and could affect efforts to trim the deficit. 

Macron’s government has latched onto the economic worries as a campaign theme, warning of the consequences if its opponents came to power. French Finance Minister Bruno Le Maire warned last week that a victory by the left-wing alliance would lead to economic collapse and the country’s exit from the EU.

“Their program is complete madness,” Le Maire said on Franceinfo radio. “It will guarantee downgrade, mass unemployment and an exit from the European Union.”

--With assistance from Samy Adghirni, Jorge Valero, Tom Mackenzie, Zoe Schneeweiss and Frank Connelly.

(Updates with comments from New Popular Front starting in eighth paragraph.)

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