With a clearly slipping public deficit, expected this year at 6.2% of gross domestic product, it displays the worst performance of the Twenty-Seven with the exception of Romania.
The European Commission published its assessment of the budgets of EU member states on Tuesday and supported the French government, threatened with censorship, by approving its rigorous efforts.
France is among the dunces in Europe. With a clearly slipping public deficit, expected this year at 6.2% of gross domestic product, it displays the worst performance of the Twenty-Seven with the exception of Romaniavery far from the 3% ceiling allowed by EU rules.
Under pressure from financial markets, the new Minister of Finance Antoine Armand has planned for next year an effort to “60 billion” euros, in the form of spending cuts and new taxes. But the bitter potion is difficult to pass. The leader of the deputies of the National Rally Marine Le Pen contests certain measures, such as the increase in taxes on electricity, which must affect the purchasing power of households. She reiterated on Monday her threat to bring down the center-right government by voting for a motion of censure with the left.
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In this delicate context, the Commission published on Tuesday its assessment of Eurozone countries' budget plans for 2025 and that of the medium-term plans of EU countries, including the trajectory of returning below the 3% deficit for countries having crossed this limit. Brussels generally gave satisfaction to the French government. The European executive has validated the scenario proposed by Paris of a reduction in the deficit to 5% of GDP in 2025, before a return “on target” in 2029 to 2.8%.
He believes that France's multi-year plan “meets the requirements and defines a credible trajectory” to reduce or maintain debt “at cautious levels”. The project for the year 2025 alone is also judged “according to“. Antoine Armand said to himself “satisfied“of this”positive evaluation”reiterating his “determination” to restore public finances. The whole question is whether the government will survive and whether the plan validated by the European executive will actually be implemented.
The outgoing European Commissioner for the Economy, Paolo Gentiloni, welcomed the commitment “strong and courageous of France”during a press conference at the European Parliament in Strasbourg. He said to himself “impressed“by the fact that the government has constructed such a budget “in a difficult context”.
“Political fragility”
“France’s political fragility obviously worries the Commission”says Andreas Eisl, expert at the Jacques-Delors Institute.
Since the summer, Europe's second-largest economy has been part of a group of eight countries in excessive deficit procedurewith Belgium, Hungary, Italy, Malta, Poland, Romania and Slovakia. Austria, whose deficit is expected at 3.6% this year, could join them, the Commission estimated on Tuesday. These countries must take corrective measures to comply in the future with the budgetary rules of the European Union, under penalty of a fine.
Since the creation of the euro, France has been in an excessive deficit most of the time, even though it has been out of it since 2017. Until now, the Commission has never dared to resort to financial sanctions, considered politically explosive. But that could change.
If it does not produce the efforts requested by its partners, France could, according to the texts, find itself imposed from next summer fines totaling 0.1% of its GDP each year, or around 2.8 billion euros.
The stability pact had been suspended between 2020 and 2023 in order to avoid a collapse of the European economy after the Covid-19 pandemic and then the war in Ukraine. It was reactivated at the start of the year while undergoing a facelift to make it more flexible and pragmatic.
THE budgetary trajectories are now adapted to each Member State and room for maneuver has been introduced for investment. They are spread over a period of four years, which can be extended to seven years to make the adjustment less brutal, in exchange for reforms. Five countries, including France, Spain and Italy, requested and obtained such an extension.
Financial sanctions for non-compliance with the pact, previously inapplicable because they were too severe, have been reduced to facilitate their implementation.
