French deficit hits record high : What solutions are on the table ?

The budget deficit of France, now reaching 173.78 billion euros, has become a crucial issue, as it illustrates the growing challenges the country faces in maintaining its financial commitments. As the Covid-19 pandemic and support measures have come to an end, efforts to restore public finances seem to have encountered major obstacles. This budget gap exceeds expectations, imposing ambitious yet controversial revisions. In this context, the government is striving to convince both European institutions and internal political actors of the viability of its austerity plan to avoid a sustainable degradation of the state’s finances.

An out-of-control deficit

The budget deficit of France continues to widen, reaching 173.783 billion euros in September, according to recent data from the Ministry of Public Accounts. This figure is barely lower than the 186.123 billion euros from last year, despite the end of the famous “whatever it takes” policy implemented during the pandemic and extended after the Ukrainian crisis. Antoine Armand, the Minister of Economy, confirmed that the deficit forecasts for 2024 are now set at 6.2 % of GDP, well above the 5.1 % previously anticipated. “We must acknowledge the shortcomings of our earlier projections and act accordingly,” he stated, highlighting the magnitude of the challenge.

This shift in the deficit is notably explained by lower-than-expected tax revenues. Despite attempts at stabilization, state revenues have fallen short of expectations, further exacerbating an already colossal deficit. In a context where the debt burden exceeds 50 billion euros, the second largest budgetary item after education, maneuvering room is drastically shrinking. The European Commission has even initiated an excessive deficit procedure against France, prompting the government to rethink its financial strategy.

The strategy to regain control of public finances

Faced with this budget impasse, the French government has no choice but to present an ambitious plan to bring the public deficit down to acceptable levels. The stated goal is to reduce the deficit to 5% of GDP by 2025 through a budgetary effort of 60 billion euros, of which 20 billion will come from tax increases and 40 billion from a targeted reduction in public spending. “We are committed to restoring the balance of public finances by 2029,” insisted Antoine Armand. He thus sets a deadline to return to European norms, with a deficit limited to 2.8 % of GDP.

However, this program does not have unanimous support within the National Assembly, where debates have revealed deep fractures. Lawmakers, faced with a minority executive, could block the passage of this budget for 2025, which threatens to force the government to invoke Article 49.3 of the Constitution to adopt the text without a vote. If this option is used, it will mark a new episode of internal political tensions, with possible repercussions on France’s ability to restore investor confidence.

This record deficit and the political tensions it causes highlight the colossal challenges awaiting France in its quest for budgetary stability. As pressure from European institutions intensifies, the government is faced with a difficult dilemma: to opt for drastic and unpopular reforms or risk losing even more financial credibility. The next steps will determine the resilience of the French strategy and its impact on the economy, in an increasingly uncertain context for public finances.