The public deficit would reach 5.6% of GDP this year instead of the hoped-for 5.1%, and would plunge to 6.2% in 2025.
More dynamic than expected, local authority spending, coupled with lower than expected revenue for the State, could, without vigorous additional savings, push the public deficit to 5.6% of GDP this year, or even 6.2% in 2025, according to budget documents transmitted by Bercy on Monday and consulted by parliamentarians.
An increase in expenses
In a letter addressed Monday evening to the general rapporteurs and the chairmen of the Finance Committees of the two assemblies, the resigning Minister of Finance Bruno Le Maire and the resigning Minister Delegate for Public Accounts Thomas Cazenave expressed concern about the “extremely rapid increase in local authority spending”.
This additional spending could “degrade the 2024 accounts by 16 billion euros compared to” the deficit trajectory sent to Brussels in the spring. Already lowered by “nearly 30 billion euros” in the spring, the tax revenue forecasts could also not be achieved “given the change in the composition of growth, which is less favorable to tax revenue,” the two ministers fear.
Regarding macroeconomic forecasts, the government is now counting on growth of 1.1% in 2024, compared to 1% previously anticipated, due to “a higher than anticipated growth carryover in mid-2024 and a forecast of growth acceleration in the 3rd quarter”. “It is up to the next government to modify the elements prepared, if necessary, in terms of both revenue and expenditure,” they write.
The outgoing government is in fact preparing for its successor a “reversible” 2025 budget based on state spending strictly equivalent to that of 2024, 492 billion euros, but distributed differently.
In a press release on Monday evening, the chairman of the Finance Committee of the Assembly, Eric Coquerel (LFI) indicated that, among the documents received from Bercy, “a summary table of the budgets planned at this stage for each ministry” shows, according to “an initial analysis”, that “only the budgets dedicated to defense and security will increase faster than inflation” next year.
60 billion in savings
Conversely, “the policies most affected should be public development aid (-18% without taking inflation into account), sport (-11%), agriculture (-6%), overseas (-4%), ecology (-1%) and health (-0.8%).
Labor (+1%) and national education (+0.5%) “will also be affected by a reduction in resources”, since the increase in planned credits is lower than a foreseeable inflation of around 2% next year.
According to Eric Coquerel, taking into account inflation and the natural end of certain programs, this draft budget “constitutes a reduction of 15 billion euros compared to the finance law adopted in 2024”, to which would be added 5 billion in savings in the Social Security financing bill, or 20 billion in total.
However, according to the documents received, the public deficit would reach 5.6% of GDP this year instead of the hoped-for 5.1%, and would plunge to 6.2% in 2025 – instead of 4.1% – if 60 billion in savings were not made. Even with 30 billion in savings, the public deficit would still stagnate at 5.2% next year, Eric Coquerel was able to read.
“An essential amending finance law”
The public deficit represents the balance of the accounts of the State, Social Security and local authorities. By September 20, France, which is already undergoing an excessive deficit procedure, like six other European countries, must send Brussels its new stability program until 2027, by which date it should normally have returned to below 3% of public deficit.
“The figures released on Monday demonstrate that the supply and competitiveness policy, which President Macron clearly intends to pursue, is leading the country ever faster into the wall,” believes Eric Coquerel, for whom “it is revenue that must be sought,” and not lesser expenditure.
The parliamentarian finally notes that “in addition to the 10 billion in credit cancellations, decided in February, Bercy has preventively frozen 16.5 billion euros of credits to draw 7 billion euros of additional cancellations at the end of the year”. If the future government wanted to cancel all these frozen credits to limit the deficit, “a corrective finance law would be essential”, according to him.
