This is the big question in France: will Michel Barnier's government survive the vote on the budget for 2025? In any case, government censorship or not, budget passed or not, there will be economic and financial consequences. Decryption.
What is blocking is the promise of 60 billion euros in savings. In terms of spending reduction, the effort would come from the State, Social Security and local authorities. As far as revenue is concerned, the solution is to increase taxes. Ideas which do not satisfy the deputies, but it is the National Assembly which will logically have the final word for the vote on this budget, unless article 49.3 is obviously activated.
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The room for maneuver is very narrow. The French public deficit is 6.1% of GDP, which is substantial and much higher than expected. The French Observatory of Economic Conditions (OFCE) estimates that this budget could halve 2025 growth and eliminate around 130,000 jobs. However, it is this text that was approved, encouraged and congratulated this week by the European Commission.
France and Greece borrow at the same rate
The France is therefore under pressure from the EU but also under pressure from the financial markets. This symbol is proof of this: it borrows at a rate slightly higher or even equivalent to that of the Greece over 10 years, approximately 3.019%. Concretely, investors consider that there is as much risk in lending to France as to Greece, which is now recovering from the bankruptcy it suffered after the global financial crisis of 2008. But all this remains symbolic. If the markets consider that the risk associated with French debt is certainly high, this French debt remains a highly sought-after financial asset because it is much less risky than others.
Analysis by Simon-Pierre Sengayrac, co-director of the Economic Observatory of the Jean Jaurès Foundation
Stéphane Geneste
Bad alignment of the planets
To these financial challenges, we must add a very fragile macroeconomic situation, including a record number of closures of industrial sites. With the current budget, less money could enter the state coffers due to business failures and its corollary: increased unemployment and lower tax revenues. Faced with such a case, the public authorities will not be able to put in place new measures to cushion the crisis, because France's finances do not allow it.
Concern from rating agencies
It's the snake biting its tail and all this put together, we arrive at a critical situation, to which we must add the rise of Chinese competition, perhaps tomorrow an increase in customs tariffs in the United States . These elements sound like bad news for exports.
In any case, this is what those who lend to France and the rating agencies observe. The S&P agency will also comment on France's rating this Friday evening. Last month, its competitor Moody's spoke out. The agency had certainly maintained the country's rating but had issued a negative outlook, opening the door to a future downgrade.
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