Laurent Saint-Martin is banking “primarily” on savings to deal with a new deficit slippage

Behind schedule, the government will present the draft budget for 2025 the week of October 9, banking “as a priority” on a cut in spending to reduce France’s heavy public deficit, which could exceed 6% of gross domestic product (GDP) this year – far from Brussels’ expectations. “I confirm that the week of October 9 will be the week of the submission of the draft finance bill for 2025”declared the Minister of the Budget, Laurent Saint-Martin, before the Finance Committee of the National Assembly.

Delayed by the dissolution of the Assembly in June and then by the late appointment of a prime minister by President Emmanuel Macron in September, the preparation of the budget promises to be particularly complex this year, with a delicate balance to be found between spending cuts and additional tax revenues to redress accounts in the deep red.

“The situation of our public finances is serious, and I won’t beat around the bush: in 2024, the public deficit risks exceeding 6% of GDP, according to the latest estimates we have.”Mr. Saint-Martin said. This is much worse than the 5.1% of GDP deficit that the outgoing government was counting on, and well above the maximum threshold of 3% set by the European Union.

Also, “We will have to make significant collective efforts”warned the minister, from the presidential camp, committing to “to speak the truth” and to promote “the dialogue” with Parliament on this issue.

Tax increases conditional on “tax justice”

The restoration of public accounts will pass ” “priority” by a reduction in spending, he explained, while saying he was open to a debate on an increase in taxation, but “if and only if it responds to a problem of tax justice”. “We will not straighten out our public finances by reducing public spending on the one hand and increasing the tax lever on the other at the same time; that will not work. We will straighten out the accounts by reducing our spending first and foremost.”Mr. Saint-Martin said.

He ruled out a “generalized tax increase”because “We don’t touch modest people and work and the middle classes”Prime Minister Michel Barnier had mentioned on Sunday possible tax increases targeted at the richest taxpayers and large companies, breaking the taboo in force at the Elysée since Mr Macron’s arrival.

Mr. Saint-Martin detailed the two “main reasons” of the massive slippage of the French public deficit in 2024: on the one hand, tax revenues “less significant than expected”a gap which can be explained, according to him, “by the composition of growth, driven more by exports than by consumption”generating less VAT than expected. On the other hand, he pointed out “the wait-and-see attitude of economic players for several months, and less activity means less revenue”.

Already penalized by the rise in interest rates, companies suspended many investments and hiring this summer while waiting to find out who would succeed Gabriel Attal. In addition, “local government spending was higher than the trajectory predicted, by around 16 billion euros for 2024”according to Mr. Saint-Martin.

Curtain up on the 1st^er october

Michel Barnier will present the preferred avenues for restoring the accounts on the 1st^er October, during his general policy speech – his first political test before Parliament before the budget.

More generally, he blamed France’s poor financial health on the “Massive, record public spending to respond to crises” Covid and inflation. This has earned France a procedure for excessive deficit before the European Commission, like six other countries in the eurozone.

Before the Finance Committee of the Assembly, the Minister of Economy and Finance, Antoine Armand, revealed that France had obtained from Brussels an extension until October 31 to present its multi-year trajectory of public finances. The initial deadline was September 20. “My mission is to maintain a bond of trust with our partners and to present them with an economic and financial trajectory that is sustainable, coherent and credible.”he said.