According to the European Commission, the French trajectory regarding its 2025 budget is “credible”. With a budgetary effort of 60 billion euros, divided between 40 billion in budget cuts and 20 billion in new revenue, the savings proposed by the Barnier government promise to return to a public deficit of 5% of GDP for 2025. Something to delight the European Commission.
If in France, the formula of spending reductions and new taxes proposed by Michel Barnier goes poorly, it nevertheless seems to suit the European Commission well. The institution published this Tuesday, November 26, its assessment of the budgetary plans of the euro zone countries for 2025 and that of the medium-term plans of the EU countries, including the trajectory of returning below the 3% deficit for the countries having crossed this limit (this is the case of France with a clearly slipping public deficit expected this year to 6.2% of gross domestic product). Of the 21 plans, the Commission estimated that 20 of them, including France, “met the requirements of the new framework and established a credible budgetary trajectory to guarantee that the level of debt of the Member States concerned is oriented towards a reduction sustainable or maintained at prudent levels.
Validation of the return to a deficit of 2.8% in 2029
Brussels generally gave satisfaction to the French government. The European executive validated the scenario proposed by Paris of a reduction in the deficit to 5% of GDP in 2025, before a return “on target” in 2029 to 2.8%. He believes that France’s multi-year plan “meets the requirements and defines a credible trajectory” to reduce or maintain debt “at prudent levels”. The project for the year 2025 alone is also judged to be “compliant”.
The new Minister of Finance, Antoine Armand, said he was “satisfied” with this “positive assessment”, reiterating his “determination” to restore public finances. The outgoing European Commissioner for the Economy, Paolo Gentiloni, welcomed France’s “strong and courageous” commitment during a press conference at the European Parliament in Strasbourg. He said he was “impressed” by the fact that the government had constructed such a budget “in a difficult context”. However, it is not certain that Michel Barnier’s government will pass the threshold of voting for this budget, and the budget itself with it. “France’s political fragility obviously worries the Commission,” underlined Andreas Eisl, expert from the Jacques-Delors Institute, to Agence France Presse.
France in excessive deficit most of the time
Since the summer, Europe’s second largest economy has been part of a group of eight countries in excessive deficit procedure, with Belgium, Hungary, Italy, Malta, Poland, Romania and Slovakia. These countries must take corrective measures to comply with European Union budgetary rules in the future, or face fines. Since the creation of the euro, France has been in an excessive deficit most of the time, even though it has been out of it since 2017.
Until now, the Commission has never dared to resort to financial sanctions, considered politically explosive. But that could change. If it does not make the efforts requested by its partners, France could, according to the texts, be imposed from next summer fines totaling 0.1% of its GDP each year, or around 2.8 billion euros. . The stability pact was suspended between 2020 and 2023 in order to avoid a collapse of the European economy after the Covid-19 pandemic and then the war in Ukraine. It was reactivated at the start of the year while undergoing a facelift to make it more flexible and pragmatic.