French public spending as a share of GDP, long among the highest in the world, exploded during the COVID-19 pandemic and then during last year’s energy price shock, pushing the budget deficit to a record.
The government of President Emmanuel Macron now aims to cut the deficit to 2.7% of economic output by the end of his five-year term in 2027, from 4.9% this year, only gradually working towards an EU-wide limit of 3% that France has rarely respected.
“To achieve this objective, we have identified through our first spending review at least 10 billion euros in savings. That’s our target,” Le Maire told a public finance conference at the finance ministry.
Savings will come from public sector spending on health, housing, quasi-public bodies and employment support measures. The government will also gradually reduce over four years a fuel tax break that benefits certain sectors, such as road transport.
Le Maire said the savings were necessary to keep to plans to hasten the reduction of France’s national debt in the coming year.
He also confirmed plans to end government caps on gas and power prices that were introduced to help households cope with last year’s energy prices, and put an end to subsidised vouchers to help low-income families cope with the prices.
Credit rating agency Fitch cut its rating on France’s sovereign debt at the end of April to AA- over concerns about potential political paralysis and social unrest after an unpopular pension reform was passed.
This month S&P spared France the embarrassment of a second downgrade in weeks, but remained cautious about the outlook, on account of strained public finances.
($1=0.9153 euros)
Source: Economy - investing.com
