Without a budget after the censorship of the Barnier government, France fell under the “special law” on January 1st. A purely technical text, only authorizing the government to raise taxes and spend the same credits as in 2024, without the new measures which appeared in the Finance bill (PLF) in preparation.
For example, no indexation of the income tax scale to inflation, at the risk of dragging, according to Bercy, “380,000 new households” into the tax, and of increasing it for others. No release of aid promised to farmers, nor to overseas territories, affected by multiple crises.
New Caledonia, whose first government led by a separatist fell on Tuesday after the resignation of loyalist members of Caledonia together, cannot receive a loan of one billion euros to rebuild itself, after the riots that began in mid-May, which left 13 dead.
As soon as power was handed over to Antoine Armand on Monday evening, the new Minister of the Economy and Finance Eric Lombard affirmed the “social emergency” at the top of his priorities. Referring to the “different sensitivities” within the government, he assured: “Within this collective, I will carry my convictions, have no doubt about it”.
Monday on BFMTV, François Bayrou wished him “a budget by mid-February”. To be quick, he would like to leave the PLF of the former government of Michel Barnier.
Surveys from the National Institute of Statistics (Insee) show the concern of households and bosses since the dissolution. Little consumption, investment, hiring: the unemployment rate is expected to rise to 7.6% next June, and INSEE paints a “gloomy landscape”.
Growth, according to INSEE, will stagnate at 0.2% in each of the first two quarters, making it almost impossible for it to reach 1.1% in 2025 as anticipated in the PLF.
“Panoply”
François Bayrou said he was sensitive, on Monday, to the unprecedented “alert signal” launched with one voice to politicians last week by the three employers' organizations (Medef, CPME, U2P) and four of the five representative unions ( with the exception of the CGT) on the economic and social risks “that instability generates”.
Among the “Himalayas” that he says he must confront are above all the debt, which reached 113.7% of GDP at the end of September, or 3,303 billion euros, and the public deficit. This plunged to 6.1% of GDP this year. Michel Barnier hoped to bring it down to 5% at the end of 2025. “Five, a little more than five” is the slightly more moving target mentioned on Monday by François Bayrou.
Already in the excessive deficit procedure, France was authorized by Brussels to return only in 2029 under the imposed limit of 3% of public deficit, rather than from 2027, but any additional slippage would risk leading to sanctions and increased mistrust. markets in the form of increased interest rates.
Faced with the risks of French “political fragmentation”, the rating agency Moody's lowered the country's sovereign rating on December 14, then that of French banks. New government censorship would throw France into the unknown.
The French Observatory of Economic Conditions (OFCE) has 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 GDP. He warned of the risk of a “fiscal cliff”.
The First Secretary of the PS, Olivier Faure, who spoke of “the vagueness” of Mr. Bayrou's remarks on Monday and whose group of deputies has the arithmetic power to avoid censorship in the government, does not see any reason for the moment not to censor.
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