France's Public Deficit Soars: Government Plans Recovery with Billions in Savings
France's public deficit rises significantly, prompting government plans to reduce it below 3% of GDP by 2029.
Key Points
- • Public deficit increasing due to declining tax revenues, not rising spending.
- • Key factors include abolition of the housing tax and reduced employer contributions.
- • Debt projected to peak at 121.7% of GDP by 2029; unemployment expected to rise.
- • Prime Minister Bayrou to unveil a recovery plan for 40 billion euros in savings.
France's public deficit has shown a significant uptrend since Emmanuel Macron took office, primarily attributed to a drastic decline in tax revenues rather than an increase in public spending. According to a report from the French Economic Observatory (OFCE), the elimination of the housing tax and the reduction of employer social contributions have been pivotal in this downturn, resulting in heightened fiscal challenges for the nation.
The OFCE's assessment indicates that the public deficit has widened significantly compared to other Eurozone countries since 2019. Current projections suggest that the public debt is set to increase, peaking at 121.7% of GDP by 2029, with the unemployment rate climbing from 7.4% to about 8.9% within the next few years. These statistics underline the government's fiscal constraints and the pressing need for financial reforms.
In light of the growing deficit, the French Court of Accounts has identified a pressing requirement for around 105 billion euros in savings or additional revenues to bring the public deficit below the 3% of GDP target by 2029. Prime Minister François Bayrou is preparing to announce a financial recovery plan aimed at generating 40 billion euros in savings specifically for the 2026 budget. This recovery plan is expected to be a focal point of the upcoming parliamentary discussions this autumn.
The implications of these financial struggles are substantial, with analysts warning of increased pressure on public services and economic stability. As Bayrou prepares for the announcement, the government’s strategies will be closely examined, particularly in balancing fiscal responsibility while managing rising unemployment and public expectations.
"The recent trends highlight a critical moment for France’s economic strategy," said an OFCE economist. "Addressing the deficit is essential not just for compliance with European norms, but for safeguarding the broader French economy against future shocks.”