France’s public deficit is projected to rise to 6.1% of GDP in 2024, significantly above previous estimates. The government plans to implement a budgetary strategy involving €60 billion in cuts and new taxes to reduce the deficit to 5% by 2025. Amid scrutiny from opposition parties, former officials are being questioned about budgetary integrity. The High Council of Public Finances recommends cautious financial assumptions, emphasizing the need for timely enactment of the finance bill to support various initiatives.
France’s Public Deficit Projections for 2024
France’s public deficit is projected to escalate to 6.1% of GDP in 2024, as detailed in the end-of-management finance bill unveiled during Wednesday’s Council of Ministers meeting. This adjustment signifies a stark increase from the previously estimated 4.4% deficit outlined in the original finance bill for 2024, which had already been revised to 5.1% by the former government. The latest forecasts now indicate an alarming rise to 6.1%, highlighting the widening gap between national revenues and expenditures.
Budgetary Adjustments and Future Plans
The financial strain could have been more pronounced if not for the cancellation of several billion euros in credits, resulting in a reduction of French state spending by approximately 6 billion euros, totaling 486.4 billion euros. The end-of-management finance bill (PLFG) proposes credit cancellations amounting to 5.6 billion euros, including 4.5 billion euros from a precautionary reserve frozen over the summer and 1.1 billion euros affecting various ministries. This figure adds to the 9.4 billion euros already canceled by the previous administration.
On the other hand, the government has allocated 4.2 billion euros in credits to address unforeseen expenses, such as the costs associated with early legislative elections and support for New Caledonia. The PLFG is scheduled for discussion starting November 19 in the National Assembly, following the anticipated vote on the overall finance bill (PLF) for 2025. This occurs amid intense debates regarding the budget proposal for the upcoming year, with the government facing challenges, sometimes even from its own supporters.
To mend the significant public accounts that have positioned France among the poorer performers in Europe, the executive branch is planning a budgetary strategy amounting to “60 billion” euros through spending cuts and new taxes. The aim is to begin reducing the deficit to 5% of GDP by 2025 and further down to 2.8% by 2029, ultimately falling below the EU’s maximum threshold of 3%.
Economy Minister Antoine Armand has pointed out that France, as the second-largest economy in the eurozone, risks being the last nation to comply with European budgetary regulations, especially as it ranks third in terms of debt after Greece and Italy, with expectations of nearly 115% of GDP by 2025. The unexpected public deficit overshoot marks the second consecutive year of deviation, having reached 5.5% of GDP in 2023 compared to the earlier forecast of 4.9%. This raises concerns over the reliability of the previous government’s financial projections.
Former Economy and Finance Minister Bruno Le Maire faces scrutiny from opposition parties, particularly from the right, as accusations of budgetary insincerity arise. Le Maire attributes the current financial predicament to the extensive support provided during multiple crises and disappointing tax revenue performance. He is set to defend his position in a Senate hearing on Thursday, as part of an inquiry into the public finance overshoot, followed by appearances from former Minister of Public Accounts and former Prime Ministers.
In its assessment of the PLFG, the High Council of Public Finances (HCFP) urged the government to adopt “prudent assumptions” in its financial proposals to prevent another significant public accounts overshoot. Bercy intends to form a scientific committee to evaluate its economic models, with HCFP President Pierre Moscovici suggesting the forecasts be managed by an “independent institution.” It is critical for the PLFG to be enacted by early December to facilitate bonus payments for public agents involved in the Olympic Games and to ensure military support for Ukraine. The government has indicated that parliamentary discussions will be prioritized, although it may also pursue adoption without a vote through Article 49.3 of the Constitution for budgetary matters.