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the budget, the Bayrou government’s first emergency

DECRYPTION – While the recovery of public accounts already appeared at the top of the Barnier government's concerns, clouds are gathering over the new Minister of the Economy. Time is running out, and the new draft budget must be presented quickly.

If the restoration of public accounts was already necessary for Michel Barnier's government after his appointment, Medef was optimistic at the beginning of October and estimated that the Brexit negotiator had “understood the urgency”. But after three months of political negotiations around an aborted budget, censorship and the appointment of a new prime minister, the budget file is still waiting to be processed.

The day after the announcement of the new Bayrou government, the emergency is even more pressing than ever. The former prime minister had nevertheless warned his successor when leaving Matignon: “We would be wrong to forget the deficit and the debt (…) otherwise they will suddenly remind us all”.

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Monday, December 23 in the evening, the new boss of Bercy – the former general director of the Caisse des Dépôts et Consignations (CDC) – assured, like his predecessor, that he would take this subject head on. On this occasion, Éric Lombard called for “treat our endemic illness, the deficit”which is expected to peak above 6% this year. To respond to this, the new tenant of Bercy will be assisted by Amélie de Montchalin, to whom Laurent Saint-Martin passes the baton to join his office of Minister Delegate in charge of Foreign Trade and French people abroad. At the same time, the Public Accounts came back under the aegis of Bercy, after a stint at Matignon during the time of Michel Barnier.

The urgency is such that the Prime Minister, although threatened by censorship only a few hours after the government's announcement, does not rule out having recourse to article 49.3 of the Constitution to force through the next draft of budget which should be revealed in the coming weeks. Although he has not yet given any details on the content of the text, François Bayrou still hopes to see it voted on by mid-February.

Accumulation of negative signals

It is an understatement to say that time is running out, as the alarm signals have multiplied in recent months. As soon as Bruno Le Maire left last September, the budgetary slippage and the explosion of the French debt were on everyone's lips. Since then, the dissolution, censorship of Michel Barnier's government and political uncertainty have shaken the confidence of economic actors. Surveys from the National Institute of Statistics (Insee) thus highlight the concerns of households and employers, which are weakening consumption, investment and hiring.

What lead to a “gloomy landscape”according to national statisticians. Growth, again according to their calculations, will stagnate at 0.2% in each of the first two quarters, hence the virtual impossibility of it reaching 1.1% in 2025 as anticipated in the PLF. The French Observatory of Economic Conditions (OFCE) has for its part calculated that, if the special law were to continue throughout 2025, the public deficit would widen further next year, reaching 6.1 to 6.4% of the GDP.

Abroad too, pressure is increasing. Brussels keeps a close eye on 's finances, and expects “budgetary efforts” from . For its part, Moody's did not give François Bayrou time to settle in Matignon. A few hours after its arrival in Matignon, the agency downgraded France's sovereign rating, in view of the “political fragmentation” of the country, which she believes is not conducive to the rapid recovery of public finances. She then lowered her Aa2 rating, which was accompanied by a “negative outlook” signaling a probable deterioration in the more or less short term, to Aa3, with a stable outlook.

“Our public finance problem has not disappeared”

Two days later, the governor of the Bank of France, François Villeroy de Galhau, warned of the urgent need to restore public finances, otherwise the country risks “progressive sinking”. “The censorship of the previous government should not lead to a denial of reality: our public finance problem has not disappeared, on the contrary”he then declared in an interview in our columns.

Same story from the Court of Auditors: “There is nothing we can do with a debt of this magnitude. That's 25 billion reimbursements in 2021, 53 billion this year, 70 billion in the coming year (…) How do you want to finance public policies for the future?worried its first president, Pierre Moscovici, the same day.

For the new government, the task promises to be immense, arduous, and risky, while the Social Security budget has already brought down Michel Barnier's team. The first step will be to construct a text to present to Parliament. The second will be to get it voted on. And quickly: in less than ten years, public debt has climbed by more than 1,000 billion euros to reach 113.7% of GDP, putting France's back against the wall.

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