PARIS (Reuters) – French government agencies will have to find other ways to cut spending, Economy and Finance Minister Bruno Le Maire said on Tuesday, after INSEE reported a public deficit for 2023 much higher than the government’s projection.
The French public deficit represented 5.5% of gross domestic product (GDP) last year, compared to 4.8% in 2022, show data published Tuesday by INSEE.
The deficit, which increased to 154.0 billion euros compared to 125.8 billion in 2022, is higher than the government’s forecasts, which initially expected it to be 4.9% of GDP, because tax revenues were less good than expected.
“The loss of tax revenue amounts to 21 billion euros” in 2023, explained Tuesday the Minister of Economy and Finance, Bruno Le Maire, on RTL.
Tax revenues were lower than expected because inflation fell more quickly than expected, Bruno Le Maire explained to journalists.
At the same time, spending on unemployment benefits and local government spending was higher than expected.
“I call for collective awareness of the need to reduce public spending and to make choices,” added the minister.
“We must keep spending that is useful, that is effective, that finances our public services, that protects our compatriots. We must firmly abandon all public spending that does not produce the expected results.”
The minister announced that he will write to hundreds of French public bodies during the day to ask them to find as many budgetary savings as their cash flow allows. Local authorities will also be asked to reduce their budgets.
Reiterating his refusal to increase taxes, Bruno Le Maire maintained the objective of returning to the 3% deficit in 2027.
“We draw the consequences in terms of the economy on all expenditure, of the State, social expenditure and local authorities,” added the minister.
The challenge is to find “both a strategy which reduces the deficit and which does not break growth”, argued the president of the Court of Auditors, Pierre Moscovici, Tuesday on France Inter.
Referring to a “slippage in execution” in 2023, the official called for a “debate without taboos” to reduce the deficit and absorb the debt.
“The tax weapon should not be banned,” insisted Pierre Moscovici, even if the “margin is not enormous”.
Furthermore, public debt fell to 110.6% of GDP, after 111.9% the previous year, according to INSEE data.
RATING AGENCIES
The French economic context is deteriorating, while the rating agencies must soon revise the rating assigned to France.
Fitch and Moody’s will announce the results of their assessments on April 26, while S&P Global Ratings will decide on May 31.
The government has warned that the deficit will be higher than the 4.9% initially forecast. Bercy’s services expected a deficit of 5.6% of GDP, Jean-François Husson, general budget rapporteur in the Senate, declared last Thursday.
The government plans to reduce the public deficit to 4.4% of GDP this year. To this end, he already announced last month 10 billion euros in additional savings to compensate for a lower-than-expected level of growth.
(Written by Corentin Chappron and Kate Entringer, with Leigh Thomas)
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