“We are all paying a high price for this budgetary precariousness,” he said, while France has already seen its rating downgraded by the Moody’s rating agency the very night following his appointment as Prime Minister, the December 13.
But faced with the degraded situation of public finances, “a sword of Damocles” for the country for which he attributed responsibility to all parties in the majority as well as the opposition, the head of government remained very vague on the contours of the economies desired as on taxes that would affect large businesses and wealthy individuals.
A dunce of the euro zone, with the third highest debt ratio behind Greece and Italy, France is now targeting a public deficit of 5.4% of GDP in 2025 (compared to 5% for the previous government). The objective is maintained to reduce it in 2029 to the maximum of 3% provided for by European rules.
– Growth at half mast –
In 2024, the public deficit is expected to reach 6.1% of GDP, a major slippage which has led to France being singled out by Brussels for excessive deficit. At the end of September, public debt reached 113.7% of GDP at 3,303 billion euros.
At the same time, the government’s growth forecast is lowered to 0.9% this year, and aligned with that of the Bank of France, compared to 1.1% before the censorship.
The Minister of the Economy, Eric Lombard, indicated at the beginning of January that he was aiming for a budgetary effort of 50 billion euros in 2025, which would be mainly based on savings rather than tax increases.
François Bayrou promised “significant savings” to achieve this. A financial effort of 2.2 billion euros will be requested from local authorities.
Against these savings, however, he renounced the drug delisting measure which had already been abandoned by Michel Barnier under pressure from the RN.
– “The account is not there” –
-Concerning taxation, Mr. Bayrou estimated that companies must be “protected against exponential increases in taxes and charges”. His predecessor aimed for a surtax on the profits of large companies, supposed to bring in 8 billion euros.
He said nothing about a possible tax targeting high incomes, inapplicable in the form envisaged by Mr. Barnier due to the rules preventing retroactivity. However, the idea would not be abandoned and could be the subject of a separate tax law.
Mr. Bayrou still affirmed in the evening that the government was working on an “anti-optimization tax for high net worth individuals” which could appear in the 2025 draft budget.
To save time, the government wanted the examination of the draft state budget for 2025 to resume on Wednesday in the Senate, where it had been interrupted by censure.
To avoid the same fate, last week he initiated close discussions with the left (excluding LFI), which is demanding at least a suspension of the pension reform. Mr. Bayrou agreed to revisit it, while warning that it would be maintained if the social partners failed to agree.
For the boss of the Socialists Olivier Faure, the PS will censure the government on Thursday unless it obtains “a clear answer” on its demand to submit the question of pensions to Parliament in any case.
LFI leader Jean-Luc Mélenchon mocked the “grotesque” concessions granted to the PS, an ally of the Insoumis within the shaky NFP alliance.
As for employers’ organizations, the first of them, Medef, welcomed the “economic voluntarism” of the speech and assured that it would participate in a “constructive” way in discussions on pensions. Sound of the same story from the CPME, which however demanded that “actions follow”, “and quickly”.
The Prime Minister also advocated a reduction in “bureaucracy” and a simplification of economic life, and announced the creation of a special fund “entirely dedicated to state reform”
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