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After two years of France’s public deficit spectacularly increasing, due to forecasting errors and perhaps a dose of deception, is the 2025 draft budget that Prime Minister Michel Barnier put together in a fortnight a credible one, this time? Is it genuine? On Thursday, October 10, the High Council of Public Finance was the first to examine the French government’s budget bill.
According to the Council, which reports to the Court of Accounts, the new prime minister’s targets do not appear to be unreasonable or incoherent, as those of previous governments had sometimes been. However, several hypotheses remain “optimistic,” and it said, it considers the overall deficit forecast “fragile.” Clearly, bringing the public deficit down to 5% of gross domestic product (GDP) within a year, as the government aims to do, promises to be very complicated, if not quite impossible to achieve. “There is more reason than in past years, not yet prudence,” summed up Pierre Moscovici, the head of the High Council of Public Finance and the Court of Accounts.
Building a budget on favorable forecasts in order to alleviate initial constraints is a classic move. Yet this can lead to bad situations, as has been the case with the 2024 budget. When it was presented in September 2023, by Bruno Le Maire, the then-finance minister, said the deficit would be reduced to 4.4% of GDP. In reality, some of his rather unrealistic initial hypotheses, notably on tax revenues and public spending, did not bear out. As a result, the deficit is set to soar to 6.1% by the end of December, according to the latest forecasts. This represents a gigantic difference – €52 billion – and there could yet be further nasty surprises by the end of the year.
Assessment of growth ‘a little high’
The deficit forecast for 2024 remains “affected by a not inconsiderable [degree of] uncertainty,” writes the High Council in its opinion, regretting that, since the budget alarm was sounded this summer, the government has not launched “more effective braking measures.” In the absence of a majority in the Assemblée Nationale, Barnier has, in particular, given up on proposing a budget amendment bill for 2024, which would have enabled certain taxes to be raised immediately or certain expenditures to be canceled.
For 2025, the macroeconomic scenario adopted by the government “is, on the whole, fragile,” as it is once again based on several optimistic hypotheses, notes the High Council. The government’s inflation forecast of 1.8% in 2025 “seems a little high, given the scale of the disinflation movement observed since the beginning of this year,” it says
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