Economy: The CAE Proposes Radical Measures to Reduce the French Public Deficit

The French economy is at a crucial turning point. The public deficit has reached a historically high level and is weighing heavily on state finances. In response to this situation, the Council for Economic Analysis (CAE) has formulated radical proposals. These measures, while ambitious, are provoking strong reactions and raising many questions.

Une nouvelle Note du @CAEinfo d'Adrien Auclert, Thomas Philippon et Xavier Ragot décrypte l'évolution de la dette publique, définit la trajectoire crédible de stabilisation et propose des solutions pour réduire le déficit public à court et moyen termes.
➡️https://t.co/G2rbTiYBql

— Conseil d'analyse économique (@CAEinfo) July 24, 2024

The French economy faces an unprecedented budgetary challenge

The public debt of France reaches 110% of GDP, or 3.160 trillion euros. The public deficit is 5.5% of GDP, which represents 154 billion euros. It is an unprecedented situation that undermines the country’s economic stability.

To address this situation and revive the economy, the CAE published a note on July 24, 2024. It recommends drastic budget consolidation of around 112 billion euros over several years. This measure is necessary to save the economy, but it also risks hampering growth and penalizing the most vulnerable.

Indeed, too rapid budgetary consolidation could have harmful consequences for the economy. It is essential to find a balance between the need to reduce the deficit and maintaining growth.

Saving the French economy: the avenues proposed by the CAE

To achieve its goals and revive the economy, the CAE proposes several avenues, including:

Increasing taxes

The CAE suggests imposing temporary taxes on exceptional profits and freezing certain social benefits. These measures would provide significant budgetary leeway.

Reducing public spending

The council recommends reducing public spending by refocusing apprenticeship aid on the less qualified. This would result in savings of 4 billion euros.

Pension reform

Although not explicitly mentioned in the CAE report, the reform of pensions is an important lever for improving the public finances situation.

Conclusion

The choice of economic policies to implement will have lasting consequences on the economy of France. It is therefore essential to conduct an in-depth debate on the different options.