The Minister of Economy and Finance Bruno Le Maire (D) and the Minister for Public Accounts Thomas Cazenave (L) leave the Elysée in Paris, February 21, 2024 (AFP/Ludovic MARIN)
The quantified trajectory of the public deficit between now and 2027 has been known for a week, but the stability program that it summarizes is presented to the Council of Ministers on Wednesday, the start of a perilous journey for French public finances.
The “PSTAB” for 2024, as specialists call it, defines for Brussels the way in which France intends to return the public deficit to below 3% of GDP in 2027, under penalty of financial sanctions.
This European debate will take place “probably beyond the summer”, hopes Bercy. It is on the domestic level that the government will first have to expose itself.
Bad budgetary news has been coming since February.
Successively: 2024 growth will not be 1.4% but 1%, the deficit was 5.5% of GDP in 2023 instead of 4.9%, and this year it will not be 4.4 % but 5.1%.
Consequence: we will have to save 10 billion euros this year – February announcement – and another 10 billion – last week’s announcement, then 20 billion in 2025, instead of the 12 initially calculated.
The new PSTAB provides for an increase in the deficit to 4.1% in 2025, 3.6% in 2026 and finally 2.9% in 2027.
At the same time, the debt would stagnate from 112.3% of GDP this year to 112% in 2027, but with a cost which would increase from 46.3 billion in 2024 to 72.3 billion euros in 2027.
“It is now a matter of specifying the content” of the program, “and ensuring its implementation in a credible manner,” warned the Governor of the Bank of France François Villeroy de Galhau on Tuesday.
Extremely rare, the tenants of Bercy have not said a word about the PSTAB since last week, leaving their cabinet directors to make the numerical announcements to the press.
The consequence perhaps of tensions which would have appeared between the Minister of Finance Bruno Le Maire and the Head of State, on the subject of the ten new billions to be saved.
– “No disagreements” –
The minister, to whom ambitions for 2027 are regularly attributed, wanted to place the savings in an amending finance law this spring, with the risk of censorship by the oppositions.
Emmanuel Macron, who describes the widening deficit as a simple “cyclical shock” linked to the slowdown in neighboring countries, considered these debates anxiety-provoking.
Finally, the savings will be included in the fall in the end-of-management finance law. Mr. Macron closed the matter: “There are no disagreements in the French Republic.”
The executive assures that the deficit will not lead to any tax increase, except perhaps to “tax the income” of large companies, as a group of parliamentarians is considering at the request of Prime Minister Gabriel Attal.
Mr. Le Maire participating on Wednesday in the spring meetings of the IMF and the World Bank in Washington, it is the Minister of Public Accounts who presents the PSTAB to the Council of Ministers.
Thomas Cazenave will also discuss it at 5:00 p.m. before the Finance Committee of the National Assembly, with the “bill relating to management results” 2023, also on the agenda of the Council of Ministers.
Before the deputies, he will succeed Pierre Moscovici, First President of the Court of Auditors and President of the High Council of Public Finances (HCFP), a body which will publish its opinion on the PSTAB on Wednesday.
Mr. Moscovici is known for not mincing his words when he disagrees with Bercy’s forecasts.
The two ministers from Bercy will debate the PSTAB again on April 29 in the National Assembly and on the 30 in the Senate.
In the meantime, the decision of two of the three main rating agencies will be made on April 26.
If Fitch, which downgraded France’s sovereign rating last year, is not expected to change it, Moody’s has not yet revealed its cards.
The most watched of the three, S&P, will decide on May 31. Without much impact on the markets, a deterioration would however have a very bad effect nine days before the European elections.
© 2024 AFP
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