Here is a report that Michel Barnier would have done without. As the budget for 2025 arrives for debate in the National Assembly, the French Observatory of Economic Conditions (OFCE) warns of the risks that this first major text from the new Prime Minister poses for the economy. It could halve French growth in 2025, without achieving its objective of reducing the public deficit, indicates a study published Wednesday October 16 by this independent research organization, linked to the National Foundation of Political Sciences. An analysis to be taken all the more seriously as it joins and amplifies the findings of the first experts to have looked into the finance bill, those of the High Council of Public Finances and the American rating agency Fitch .
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Like the High Council or the general rapporteur of the budget to the Assembly, Charles de Courson, the OFCE specialists first question the presentation of the budget retained by the government. In his political communication, Michel Barnier and his ministers announce an effort of 60 billion euros, with two thirds of a reduction in spending and a third of a tax increase. These deliberately impressive figures are based on a comparison between the budget planned for 2025 and a hypothetical scenario where no measures would be taken.
For the OFCE, which analyzes the 2025 budget more classically compared to that of the previous year, the looming movement revolves around 44 billion euros. An already substantial amount. “An effort of this magnitude has not been observed since the period 2012-2013”, underline the main authors of the study, Eric Heyer and Xavier Timbeau. But only a third of this adjustment would come from reducing public spending, and two thirds from increasing revenues. The exact opposite of the proportion displayed by the government.
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Then and above all, the OFCE insists on the foreseeable impact of this budget on the economy. According to researchers’ calculations, the Barnier plan risks cutting growth by 0.8 points of gross domestic product (GDP) in 2025. The budgetary shock alone could thus halve the progression of economic activity, which would be reduced to 0.8%. A massive effect, much more marked than what the government anticipates, which wants to believe that growth will remain stable at 1.1% in 2025.
Experts anticipate 130,000 job losses
And again, the OFCE only included in its forecasts the measures expressly included in the finance bill as it was transmitted to the Assembly. Economists have not taken into account the additional projects that the government intends to propose through amendments, such as the increase in the tax on plane tickets and the additional 5 billion euros in reductions in public spending. “Given the unstable political balance in the National Assembly, it seems prudent not to add these poorly documented measures,” they write. If this additional plan were adopted, the impact on growth would be even more violent, and would reach 0.9 points of GDP.
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