[Article publié le vendredi 10 mars 2023 à 8:0, mis à jour à 15:52]
The Court of Auditors issued a stern warning to the executive. In the midst of pension reform, the magistrates have drawn up a picture deemed worrying regarding the situation of public finances in France. In his annual public report unveiled this Friday, March 10, the president of the institution Pierre Moscovici fired red balls at the executive’s budgetary policy. “The recovery of public finances must be a national priority. This must go through a strengthening of the quality of our public spending”he said during a press briefing.
After several years of spending to protect households and businesses from the disastrous consequences of the health crisis, magistrates believe that we must get out of “whatever the cost”.
This message of budgetary discipline sent since January to the government comes in a highly inflammable economic and social context. The consumer price index, driven by food prices, was far from falling in February, to 6.2% from 6% in January. Gross domestic product (GDP) growth struggled to rebound at the start of the year. The Banque de France is now counting on a meager 0.1% growth in the first quarter according to its latest monthly economic survey unveiled this week. In Parliament, the government hopes to pass its decried pension reform this weekend by the Senate dominated by the right. Pressed by the unions, Emmanuel Macron has so far refused to receive them at the Elysee Palace and is awaiting the vote on the reform to speak.
Despite the disconnection of emergency measures, high deficits in 2022 and 2023
After two years of pandemic, the government had announced a gradual disconnection of emergency measures (solidarity fund, partial unemployment, PGE) implemented in spring 2020. But the outbreak of the conflict in Ukraine in February 2022 changed the situation. . The executive had to deploy numerous measures to try to cushion the shock on households and businesses (tariff shield, fuel rebate, food check, energy check).
As a result, the public deficit relative to gross domestic product should remain high at 5% in 2022 and 2023 following having plunged to 6.5% in 2021. « A trajectory of a return to the deficit below 3% in 2027 is optimistic”, warned Pierre Moscovici. For its part, the public debt should reach 111.4% of GDP in 2023, “nearly 14 points above its pre-crisis level”specify the magistrates.
Public finances: France, bad student in the euro zone
On the scale of the Monetary Union, France is a bad student in terms of public finances. « The situation of France’s public finances will thus remain in 2023 among the most deteriorated in the euro zone, while the European Commission judges that the risks are high on the sustainability of French public debt in the medium term., underline the officials. They point to the divergence between groups of countries, which is a risk factor. They consider convergence necessary at a time when the European Central Bank (ECB) is tightening its monetary policy. Since the summer of 2022, central bankers have decided to tighten the monetary screw by raising rates and ending the monetary easing program (quantitative easing or asset buyback). In the euro zone, the general price index has started to mark time on average, but there are significant disparities between countries, making the ECB’s task even more complex.
Reducing deficits must go through growth according to Pierre Moscovici
During his speech, the first president of the Court of Auditors mentioned several ways to reduce the tricolor public deficit. Unsurprisingly, he initially advocated a return to economic activity. « Growth needs to be muscled”, he insisted. In view of the sharp slowdown in activity at the end of 2022 and in the first quarter of 2023, he considers the government’s forecasts “optimistic” for 2023 (1%).
The report also points out that this figure is well above the forecasts of the consensus of economists who now expect growth of 0.4% this year. Similarly, the inflation projected by the government (4.2% in 2023) is also more favorable than the consensus of economists (4.8% in 2023).
Exit from “whatever it costs” by controlling expenses
Finally, the other main recommendation put forward by Pierre Moscovici must go through the lever of public spending. “You have to control spending by leaving ‘whatever the cost'”, he said. For his part, the Minister of the Economy Bruno Le Maire announced an annual review of public spending during his vows in January. Which was hailed by Pierre Moscovici.
On the other hand, the first magistrate of the Court was not precise on the budgetary consequences of the reform of pensions and unemployment insurance. Asked by the Tribune, he returned the ball to another representative of the Court. In its response to the rapporteurs, the government highlighted the reform of unemployment insurance and that of pensions currently under debate in the Senate.