ALAIN JOCARD / AFP
The budget prepared by Michel Barnier could weigh heavily on growth, warns the OFCE.
POLITICS – Upon arriving in Matignon, Michel Barnier refused to pretend. “The budgetary situation that I discovered is very serious”he declared, even if it meant exasperating certain historic Macronists who found this new Prime Minister decidedly ungrateful. With the budget now tied up, with its share of savings and tax increases, it appears that the measures envisaged to combat the widening public deficit could in reality… divide growth by two.
In its report for the year 2025, the French Observatory of Economic Conditions (OFCE) shows that the Barnier budget could reduce growth by 0.8 points of GDP. Or 0.3 points less than the forecast made by the government. And again, as we recall The Worldthe independent body only based its forecasts on the measures explicitly announced in the finance bill as it was transmitted to the Assembly. In fact, both the government and the oppositions will be able to significantly modify the budget by having amendments adopted. Certain measures such as the increase in the tax on airline tickets or a new sharp cut in public spending, considered in the corridors of certain ministries, could weigh even more heavily on growth.
Because as economists Éric Heyer and Xavier Timbeau, main authors of the report, write, growth is driven by two factors: foreign trade and public spending. If one or the other retracts, all the wealth produced in the country generally declines. Moreover, the OFCE forecasts a public deficit of around 5.3% of GDP at the end of 2025, where the executive was rather counting on 5%.
The “austerity budget” denounced loudly by the left and imagined by the government as a first way out of over-indebtedness has a strong chance of penalizing economic activity. Even the unemployment rate risks suffering the consequences, notably with the end of the reduction in certain social security contributions paid by companies. Political instability, and the possibility of the government being overthrown in the coming weeks during the budget review, add to the uncertainty.
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