The bad news about public finances continues to flow. This Friday, INSEE announced that France’s public debt has climbed. It now stands at 110.7% of GDP at the end of the first quarter, compared to 109.9% at the end of 2023.
The country’s public debt, which has increased massively since the health crisis, increased by 58.3 billion euros to stand at 3,159.7 billion euros, said the National Institute of Statistics , while the poor state of public finances is one of the central subjects of the early legislative campaign. Please note, however, that public debt is down compared to the first quarter of 2023 (111.9% of GDP).
France’s Excessive Deficit: Brussels Deals a Blow to the Government
In detail, the increase recorded over the first three months of the year comes mainly from the increase in the State debt (+44.4 billion euros). That of social security administrations increased by 12.9 billion euros. On the other hand, the debt of local public administrations remained almost stable (+0.8 billion), as did that of various central administration bodies (+0.2 billion).
Slippage on the public deficit
This rise in the debt rate comes a few months after another piece of bad news on public finances. In 2023, the public deficit had slipped to 5.5% of GDP, more than expected by the government. The latter attributed this slippage to tax revenues of 21 billion euros lower than expected last year. « We had an accident. I readily admit it. In 2023, everyone has fallen on us. There was a revenue accident, we are at 5.5 (% of GDP) instead of being below 5 », recognized the Minister of the Economy, Bruno Le Maire, on Wednesday.
The French minister justified the financial slippage by the pandemic in 2020, then the inflation crisis in the wake of the war in Ukraine from 2022.
« We have protected the French economy a lot during the Covid crisis and during inflation, and protected French households a lot. The result is that we are the first country in the eurozone to have returned to its pre-crisis level of activity. “, he explained on June 21.
Public finances: the severe red card from the Senate to the government
Europe threatens France with proceedings for excessive public deficit
The fact remains that this slippage is not at all viewed favorably by the European Commission which opened the way in mid-June to procedures for excessive public deficits against France and six other countries.
The public deficits of these countries exceeded, last year, the limit of 3% of gross domestic product (GDP), the threshold set by the Stability Pact since 1997 to keep the euro zone accounts in balance. Formally, the European executive will propose to member states to open the procedures at a future meeting of finance ministers on July 16. Nothing new for France, whose last budget surplus dates back to 1974, and which has been in an excessive deficit procedure most of the time since the creation of the euro at the turn of the 2000s. However, it came out of it in 2017.
Bruno Le Maire promises to reduce the deficit
To avoid sanctions from Europe and to calm fears, Bruno Le Maire said he would reduce the debt and bring the public deficit below the European threshold of 3% of GDP by 2027.
The government planned, before the announcement of the dissolution of the National Assembly on June 9, a budgetary effort of an additional 20 billion in 2024, then another 20 billion in 2025. « In 2024, we have taken the necessary decisions to be at 5.1 (% of GDP). In 2025, we should be at 4.1% (…) in 2027, we will be at 3 “, within the limits provided by the European Commission, added Bruno Le Maire on Wednesday.
But in this context of legislative elections, the political parties in the race are presenting costly programs which risk pushing France further into an excessive deficit.
The Minister of the Economy nevertheless wants to be reassuring. The latter affirmed, Wednesday, on BFMTV, that the State had “ 3 billion euros in excess tax revenue ” compared to its forecasts.” I can already tell you that our tax revenues today are good. As I speak to you, we have 3 billion euros in excess tax revenue compared to what was forecast in May 2024. This is good news “, he indicated.
