A new revision seemed inevitable. Last September, the Banque de France had maintained its forecast of 1.2 % growth, despite the disruption born from dissolution, before seeing it in December, at 0.9 %. This Thursday, Governor François Villeroy de Galhau announced still lower it to 0.7 %. A very bad news for Eric Lombard and his teams. Because to calibrate the budget, adopted in pain in February, the Minister of the Economy relied on the institution’s figures. Thus avoiding any excess of optimism, often criticized in Bercy under the Bruno Le Maire era.
Although reasonable on paper, this choice already comes up against a new reality for France and Europe. In the space of a few months, the face of the world has radically changed. Back to power in the United States, Donald Trump upset geopolitical and economic balances. Customs duties, disengagement vis-à-vis Ukraine … The American president does not spare anyone. And plunges everyone into uncertainty. The term chosen by the Banque de France to justify its correction and behind which many observers and experts, struck with myopia, are stored.
Defense, a new element to take into account
In the meantime, this lower growth is synonymous with thinner tax revenue than expected. Under these conditions, it is difficult to imagine how the public deficit could reach the target of 5.4 % of GDP in 2025 set in the finance bill – against the more than 6 % expected in 2024. An objective that already seemed compromised, even before the Banque de France is updated.
Especially since it is now necessary to take into account the European wishes in defense. Emmanuel Macron intends, like its European counterparts, significantly increase military spending so that they reach 3 % of GDP – against less than 2 % currently. The amount to be identified would be around 30 billion euros, as much as the effort of savings planned in the 2025 budget… Certainly France should benefit in part from the rearmament plan of Europe and its 800 billion euros, concocted by Ursula von der Leyen. But what Paris will touch in this context will not be enough to cover the envisaged effort.
Few means
The track of an increase in taxes was immediately dismissed. Remain those of the drop in public spending and improving their effectiveness. A sweet dream, as we know that successive governments have never managed to tackle it. Without forgetting that at the political level, France is still at the same point, braked by a strongly fragmented parliament. Maybe even more on defense issues.
The abstention of the national rally and the opposition of rebellious France and the Communist Party during the vote of a resolution to support Ukraine in the National Assembly on Wednesday March 12 still showed it. At the beginning of the month, Eric Lombard, put to the perfume by the Banque de France of his future updating, had started to defuse the announcement, saying: “We will adapt if necessary”. The markets will in any case be extremely attentive to the evolution of government deficit forecasts. The rates from which European countries have already started to rise. In this context, the verdict of the Fitch rating agency on Friday, March 14, which risks degrading the note of France, is eagerly awaited. And could change the financial situation.