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Saturday, December 2, 2023

one week before the S&P note, France’s public spending is deemed “excessive” by Brussels

France would have done without it. While the rating agency Standard and Poor’s (S&P) will pronounce on December 1 on the rating of French debt, the vice-president of the European Commission, Valdis Dombrovskis, declared that France but also Belgium, the Croatia and Finland, “ may not be in line with the recommendations » budget of the European Union for next year, due to excessive public spending. In other words, these four countries must “ decrease spending » to respect European limits, which set two ceilings not to be exceeded: that of the public deficit at 3% of gross domestic product (GDP) and that of the public debt at 60% of GDP.

Deactivated at the start of 2020 to avoid a collapse of the European economy affected by the Covid pandemic, these EU budgetary rules were extended until the end of 2023 due to the repercussions of the war in Ukraine but the Stability Pact will be reactivated on January 1st.

Serene Bercy

In France, Bercy does not seem worried by the words of Valdis Dombrovskis. France is ” online » on the reduction of the public deficit, which is expected to 4.4% of gross domestic product (GDP), after 4.8% in 2023, we assure the Ministry of Finance, confirming the objective of bringing it back from 2027 to 3%, the limit set by the Stability Pact. Debt would remain stable at 109.7% of GDP in 2024, reaching 108.1% at the end of the five-year term. For the first time since 2015, total state spending will decrease in 2024, by 4 billion euros compared to 2023, to 491 billion euros.

“Substantial progress has been made with regard to the structural elements of the budgetary situation in France,” welcomed the Commissioner for the Economy, Paolo Gentiloni, specifying that within the euro zone, no project of budget for 2024 does not present “serious risk” of non-compliance with the Pact.

The limit for the growth of net primary expenditure, that is to say excluding interest charges and the impact of tax increases or reductions, was set by the EU at 2.3% for France in 2024. Brussels predicts that it will in fact reach 2.8%. But Bercy emphasizes that its finance bill is counting on 2.6%, a gap of 0.3% deemed “ limit “. “We will keep our forecasts. Outside of the Covid period, France has always respected its forecasts in recent years,” we underline at Bercy. Paris also believes that the upward revision this fall of growth prospects for France should modify the assessment of the evolution of its expenditure, an element not taken into account in the opinion published Tuesday and which, according to Bercy, would put the country back on track. The government is counting on economic growth of 1% this year, then 1.4% in 2024.

A debt of 3,000 billion euros

In addition to the four countries singled out on Tuesday, Paolo Gentiloni stressed that nine other member states were “not not completely online » with the recommendations, including Germany which is called, like France, to delete “ as soon as possible » the aid measures adopted to reduce the energy bills of households and businesses.

Faced with a debt which has exceeded 3,000 billion euros and a deficit well beyond the European standards, the government wanted to give proof of seriousness by unveiling its finance bill for 2024 at the end of September. At least 16 billion euros Euro savings are planned, resulting mainly from the end of exceptional measures, such as the tariff shield for electricity. For the 2025 budget, the government plans 12 billion euros in additional savings.

“The question is whether we manage or whether we transform” (Bruno Le Maire and Thomas Cazenave)