the essential
A National Assembly commission of inquiry must shed light on the reasons for the violent spiraling of the public deficit. According to Eric Heyer, director of the Analysis and Forecasting department of the OFCE, Bercy’s services were aware, they raised the alarm, but they underestimated the extent of the drift in public accounts.
Did you know that Bercy services had issued alerts about the slippage in public accounts?
There were indeed warnings, from the end of 2023. They saw quite quickly that the deficit for 2024 was going to be higher than forecasts, because tax revenues would be lower than expected. Bercy even asked local authorities to spend less. They replied that it was unfortunately too late… So yes, alerts were given about a slippage that was anticipated.
Was its scale also?
The slippage from forecasts was 0.4% in 2023. This year it is expected to be at least 1.7%. In other words, the finance law anticipated a deficit of 4.4% when it should exceed 6% of GDP. It could even be, according to rumors, that it will be much more, because the year is not over.
DR
When did we realize that there was a risk of such a gigantic gap?
We did not yet know this last July, since an alert from Bercy, made public this time, reported a deficit of “only” 5.7% at the end of the year.
Was Emmanuel Macron made aware of this drift in accounts?
I imagine so, to the extent that Bercy’s services fairly quickly presented him with an amended finance bill for 2024. Which was refused to them by successive Prime Ministers Elisabeth Borne and Gabriel Attal. This is perhaps what former Minister of the Economy Bruno Le Maire is talking about when he says: “The truth will emerge later”.
Isn’t the latter primarily responsible in this affair?
It’s a question of point of view. His position is rather to say that he reduced the deficits before the health and energy crises, which is true. That he then “saved” the French economy during these two crises and that the accounts were weighed down because of them. Others may say on the contrary that it was by betting on a fiscal shock at the start of Emmanuel Macron’s mandate that Bruno Le Maire made a mistake. He reduced taxes by 40 billion euros, without this loss of revenue being compensated by spending cuts or new taxes.
Is this the reason for the current deficit?
There are four factors that explain the situation in which our public accounts find themselves. Bercy’s services were wrong in their growth forecasts, which were driven more by our exports than by our consumption, which does not correspond to the same tax revenues. They were wrong about the level of inflation, which also affects revenues. And they were wrong to bet that there would be more tax revenue than growth, the so-called “revenue-to-GDP elasticity.”
What is the fourth reason?
It is the slippage in spending by local authorities, which has not been controlled. When we add up the cost of these four factors, we come across a 1.7% drift in the deficit compared to what was planned.
Will an effort of 60 billion euros in 2024 be enough to fill this abysmal hole?
First, according to our calculations, it will be an effort of 44 billion and not 60. Then, this should bring the public deficit to around 5%. However, the government’s objective is for it to fall below 3% by 2029. It will therefore be necessary to make at least a comparable effort for several years.
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