(Updated with statements by Bruno Le Maire)
by Myriam Rivet
PARIS, July 29 (Reuters) – Economy and Finance Minister Bruno Le Maire on Friday defended the government’s “credible and serious” economic forecasts and budget path for the next five years, after criticism from the High Public Finance Council (HCFP).
Bruno Le Maire presented Friday in the Council of Ministers the “stability program 2022-2027”, a document summarizing the macroeconomic forecasts and the trajectory of public finances for the years to come, updated every year and transmitted to the European Commission.
In an opinion https://www.hcfp.fr/sites/default/files/2022-07/Avis%20HCFP%202022-3.pdf published Friday morning, the HCFP, an independent body chaired by the President of the Court of Auditors , Pierre Moscovici, judged that the government had shown itself to be too optimistic in its growth forecasts and too timorous in its strategy for reducing the public deficit.
“Pierre Moscovici (president of the HCFP-Editor’s note) is totally in his role but I think that our trajectory is credible and responsible”, declared Bruno Le Maire during the report of the council of ministers, stressing that Bercy’s forecasts were in line with those of the European Commission, for example.
“We believe in the possibility of improving French growth through structural reforms,” explained the minister.
Especially since Emmanuel Macron’s first five-year term – during which he was already the holder of the Economy and Finance portfolio – “showed that we knew how to keep our commitments”, despite the crises, he said. added.
For Bruno Le Maire, the reforms planned for this new five-year term, in particular those of unemployment insurance, pensions or even training, will make it possible “to exploit the French economic potential which is considerable”.
“That does not preclude good control of public spending, as I have said, but I think that this choice we have made, which is that of growth and full employment, is the most responsible and that it is perfectly attainable”, he summed up.
UNCERTAINTIES
In its opinion on the 2022-2027 stability program – the broad lines of which were presented last week – the HCFP stresses that it is based on “very positive” growth assumptions and that the path for the recovery of public finances adopted foresees “an unambitious reduction in the deficit”, with a return of the public deficit below the European limit of only three points of GDP “from 2027, and this, without any safety margin”.
“The High Council considers it essential that the next public finance programming law corrects these estimates by fixing (them) on a prudent basis (..) and that it gives credibility to the public finance trajectory adopted by a precise description of the reforms and expenditure measures”, notes this independent body
Pierre Moscovici, first president of the Court of Auditors and as such president of the HCFP, summarized the reservations of the High Council in an interview published Thursday evening on the Figaro website https://www.lefigaro.fr/conjoncture/pierre- moscovici-au-figaro-if-france-is-the-country-which-makes-the-least-effort-on-its-debt-this-will-eventually-see-20220728.
“The trajectory of public finances is based on a somewhat optimistic growth forecast, on expenditure cuts at this stage undocumented and on an assumption of an increase in the rate of compulsory levies allowed by the elimination of tax loopholes, highly desirable, but whose experience shows the difficulty of implementation”, he underlined.
According to an initial estimate published Friday by INSEE, the French economy experienced an unexpected rebound in the second quarter, with a 0.5% increase in gross domestic product (GDP), which in the eyes of Bruno Le Maire is a “victory of the French economy in difficult times”.
This rebound, which took place despite sluggish domestic demand, was fueled by the positive contribution of foreign trade, under the effect of dynamic exports coupled with falling imports.
“Not bad perf (ormance)”, greets Ludovic Subran, chief economist of Allianz, on Twitter, while stressing that “it comes mainly from the fall in imports. Thank you international shocks and imported inflation.” (With contributions from Elizabeth Pineau, editing by Kate Entringer)