2023-06-18 14:51:13
After announcing a “review of public expenditure”, the government must detail this Monday the budget cuts envisaged on the occasion of the Assizes of public finances. Objective: to straighten the accounts of France and accelerate its deleveraging.
Bruno Le Maire hammers it: the “‘whatever the cost’, it’s over”. The Minister of the Economy, who is organizing the Assises des finances publiques in Bercy this Monday alongside the Prime Minister, Elisabeth Borne, and the Minister Delegate for Public Accounts, Gabriel Attal, intends to make this meeting the starting point of its new roadmap focused on accelerating France’s debt reduction.
It must be said that following the tens of billions of euros poured out to protect households and businesses during the health crisis and then in the face of inflation once morest a backdrop of rising interest rates, the State’s financial room for maneuver is considerably reduced.
Which did not escape Fitch. The US agency sounded the first alert at the end of April by downgrading France’s debt rating from AA to AA-, citing “significant budget deficits” and “modest progress” in reducing them. A few weeks later, its competitor S&P Global granted a reprieve to France by confirming the “AA” rating but maintaining the negative outlook, a way of saying that the country is not immune to a lowering.
To show its budgetary seriousness, the executive swears that the time for Covid aid and other inflation compensation is now over. At the same time in Bercy, brains are boiling to find sources of savings to include in the 2024 budget presented in the fall. Emmanuel Macron excluding any tax increase, it is public spending that is targeted. Hence Bruno Le Maire’s promise to initiate a “public expenditure review” at the start of the year which will concern “all public expenditure, without exception: that of the State, but also that of local authorities and the social sphere”. Six months following the start of the work, the minister must detail this Monday the cuts envisaged.
• What expenditure reduction objective?
No question of speaking of austerity, simply of a recovery of the public accounts. Bruno Le Maire indeed ensures that the review of public expenditure which will take place every year until 2027 has the sole purpose of identifying “ineffective expenditure” in order to “save several billion” euros.
“Faced with the most serious economic crisis since 1929, we have preserved our factories, our businesses, our jobs and our qualifications”, justified the minister at the beginning of June in the Sunday newspaper. “Now it’s time to get back to normal. But that doesn’t mean austerity.”
The government has set quantified objectives: reduce public spending to 53.5% of GDP in 2027, once morest 57.5% in 2022, return the deficit to below 3% by the end of the five-year period and reduce the debt at 108.3% (111.6% today) at the same maturity.
• What is the state of public finances?
With the health crisis and the return of inflation, the State has seen its expenditure increase sharply in recent years. At 336.1 billion euros in 2019, the last year before the Covid, the net expenditure of the general budget increased sharply to reach 445.7 billion euros in 2022, in constant euros. For its part, the public deficit stood at -4.7% last year, down from 2020 and 2021, but still far from the -3.1% of 2019.
Finally, the public debt fell from 97.4% of GDP to 111.6% between 2019 and 2022. Although it fell by 1.3 points between 2021 and 2022, the effort is much less significant than that made in the most other European countries. With nearly 3000 billion euros in debt, France also has the highest level of indebtedness of the countries rated “AA” by the rating agencies.
For the government, the restoration of the public accounts is all the more urgent as the sharp rise in interest rates in a context of inflation significantly increases the burden of the debt (all government expenditure devoted to the payment of interest of its debt) which might become the main item of State expenditure by 2027, reaching 71.2 billion euros, once morest 41 billion in 2023.
• What avenues are envisaged?
The adjustment variables to save money are limited for the executive. Especially following a painful pension reform and without an absolute majority in the National Assembly. The equation is all the more complicated in that new, colossal investment needs are emerging with the energy transition and that significant expenditure has already been committed for defence, justice or education.
Bruno Le Maire has nevertheless sketched out a few avenues which should make it possible to reduce the airfoil. The Bercy tenant is counting first on the end of the energy shield, the gains from reforms such as pensions or unemployment insurance, full employment or even economic growth which he anticipates to be more dynamic, following a slowdown in 2023.
In an interview with Echos, the minister also prepared minds, judging in particular the planing of 2 billion euros decided for public support to the real estate sector “ineffective and too expensive”. He also wants to withdraw tax advantages on fossil fuels and evokes a reduction in employment aid or the establishment of a remainder payable by the personal training account (CPF). Denouncing “the explosion in the number of sick leaves”, Gabriel Attal for his part cited among the avenues of expenditure reductions envisaged “the daily allowances of Health Insurance”.
The executive has also frozen an additional 1% of the 2023 budget appropriations. Finally, the ministries will also be put to work while Elisabeth Borne has asked each of her ministers to identify possible savings up to 5% of their expenditure. . This would allow, if everyone played the game, to save around 7 billion euros which would be invested in the ecological transition, according to Bruno Le Maire.
• What to expect?
Will the Conference on Public Finances be really effective? The communities, through the associations of mayors, elected officials of the departments and regions, have already announced that they will boycott the meeting. “The representatives of the Association of Mayors of France (AMF) expressed their disagreement on the analysis as on the consequences” of the situation of the finances of the communities and the framework measures that the Minister of the Economy considers necessary, indicate the AMF in a press release.
And to add: “The AMF considers that the finances of the communities have no part in the massive indebtedness of the State, that on the contrary they contribute to its reduction by their surpluses and that the reductions in endowments do not produced no improvement since the weight of the debt in the GDP does not stop increasing”.
For the rest, François Ecalle, public finance specialist, recalls on BFM Business that there have been “many reviews of public expenditure” in the past “and that this has not prevented public expenditure from increasing”. On his site Wickednesshe returns to the history of public expenditure reviews in France, evoking for example “the central committee of inquiry into the cost and performance of public services” in 1946, the “rationalization of budgetary choices” in 1968, the ” Rocard circular” in 1989, the “organic law relating to finance laws” of 2001, the “general review of public policies” in 2007, the “modernization of public action” in 2012… Overall, “the assessment of these expenditure reviews in terms of savings is disappointing, apart from the job cuts for the years 2007-2012 in the State services”, slice François Ecalle.
However, “it is not useless to speak once more from time to time of the effectiveness of public spending”, he believes. But “the review of public expenditure cannot make it possible to achieve budgetary savings if this objective is not assumed at the highest political level. However, the revisions of expenditure in France have almost always relegated this objective to more consensual ambitions, and certainly legitimate, such as improving the services provided to users and the working conditions of agents”.
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