France wants to accelerate the recovery of its public accounts

April 20, 2023

Less public spending to preserve the financial “credibility” of France: the government on Thursday raised its ambition in terms of debt reduction and deficit reduction by 2027, at the end of the five-year term.

For the first time since the health crisis linked to Covid-19 and the massive support expenditure of “whatever the cost”, France will return partly to the European nails in 2027, the last year of President Emmanuel Macron’s second term. .

“We want to accelerate France’s debt reduction”, declared the Minister of Economy and Finance, Bruno Le Maire, presenting the new roadmap for public finances for the coming years.

“France’s European credibility is at stake,” he warned the press, as two international rating agencies are due to publish their opinion on the country’s finances by the end of April.

The public deficit is expected to fall firmly below the 3% of gross domestic product (GDP) mark set by EU fiscal rules: 2.7% in 2027, compared to a forecast of 2.9% so far. After reaching 4.7% in 2022, it should rise slightly this year (4.9%) before gradually declining from 2024.

Deleveraging should also experience a boost, with debt representing 108.3% of GDP in 2027, i.e. 4 points less than previously envisaged but still very far from the European objective of 60%. It was at 111.6% of GDP at the end of 2022.

These prospects are contained in the stability program (PSTAB) which will be presented to the Council of Ministers on April 26 and which is transmitted each year by the EU Member States to the European Commission.

No more exceptional checks and other aid worth tens of billions: as a pledge of budgetary seriousness, the government affirms its desire to initiate a “cooling” of public spending, which should progress more slowly than inflation. .

Price increases should begin to slow from mid-2023, despite a forecast raised to 4.9% (vs. 4.2% previously) for this year. It had reached 5.2% in 2022.

“We have just asked our compatriots to make an effort with the pension reform (…). It is right that public actors (…) also be involved”, underlined Bruno Le Maire.

At the beginning of March, the Court of Auditors was very critical of the government’s slowness to straighten out the country’s public finances, which ranks among the worst European students.

“We absolutely must reduce this debt burden (…). The choice is clear: either debt reduction now or taxes tomorrow,” said Bruno Le Maire, categorically ruling out the latter scenario.

This cost of debt – one of the main items in the state budget – has soared due to much higher debt since the health crisis and a sharp rise in interest rates.

And the bill will increase further by 10 billion euros by 2027, anticipates the government.

The need for a more resolute recovery is all the more accentuated since after its suspension during the Covid, the EU’s Stability Pact setting the budgetary objectives will soon be reactivated.

“In some sectors, we spend too much,” said the Minister of Public Accounts, Gabriel Attal, citing housing in particular. However, “an over-indebted country is not and cannot be a free country.”

In 2027, public spending will increase to 53.5% of GDP against 57.5% currently.

A spending review is underway with the ambition of generating billions in savings. At the same time, Prime Minister Elisabeth Borne asked the ministries “to identify 5% of room for maneuver on their budget to finance the ecological transition”, according to Bruno Le Maire.

Another source of savings, up to 30 billion euros by 2025, the decline in energy prices and the end of the tariff shield.

At the same time, the government anticipates progressively more dynamic growth, up to 1.8% in 2027 (against 1% this year) and full employment with unemployment at 5%.

In opposition, the socialist group in the National Assembly was worried about the drop in public spending which, according to him, risks “brutalising” schools, hospitals or transport.