Laurent Saint-Martin gives “priority” to savings to deal with a new slide in the deficit

Delayed, government to present 2025 budget project the week of October 9, banking “priority” on a spending cut to reduce France’s high public deficit, which could exceed 6% of gross domestic product (GDP) this year, far below Brussels’ expectations. “I confirm that the week of October 9 will be the week of presentation of the 2025 finance bill”declared Budget Minister Laurent Saint-Martin before the National Assembly’s Finance Committee.

Delayed by the dissolution of the Assembly in June and then by the late appointment of a prime minister by President Emmanuel Macron in September, the preparation of the budget promises to be particularly complex this year, with a delicate balance between spending cuts and additional tax revenues to clean up the deep red accounts.

“The situation of our public finances is serious and I will not beat around the bush: in 2024, the public deficit risks exceeding 6% of GDP, according to the latest estimates available to us”said Mr Saint-Martin. This is much worse than the 5.1% of GDP deficit that the outgoing government was counting on, and well above the maximum threshold of 3% set by the European Union.

Also, “We will have to make important collective efforts”The minister warned from the presidential camp, committing to “to tell the truth” and to promote “the dialogue” with Parliament on this issue.

Tax increases are conditional on “tax justice”

The restoration of public accounts will happen” priority “ for a reduction in spending, he explained, although he said he was open to a debate on an increase in taxes, but “if and only if it addresses an issue of tax justice”. “We are not going to straighten out our public finances by reducing public spending on the one hand and using the fiscal lever on the other at the same time, that will not work. We will clean up the accounts by reducing our spending first and foremost.”said Mr. Saint-Martin.

Excluded a “general tax increases”because “We do not touch people of modest means, workers and the middle classes”Prime Minister Michel Barnier spoke on Sunday of possible tax increases targeting the richest taxpayers and big companies, breaking the taboo in force at the Elysee Palace since Macron’s arrival.

Mr. Saint-Martin detailed the two “main reasons” of the huge slide in the French public deficit in 2024: on the one hand, tax revenues “less significant than expected”a gap that can be explained, according to him, “due to the composition of growth, driven more by exports than by consumption”generating less VAT than expected. On the other hand, he pointed out “The wait-and-see attitude of economic actors has been going on for several months, and less activity means less income”.

Already penalized by rising interest rates, companies suspended numerous investments and hirings this summer while waiting to find out who would succeed Gabriel Attal. In addition, “Local authorities’ spending was higher than expected, in the order of €16 billion by 2024”according to Mr. Saint-Martin.

Curtain up in 1^Ahem October

Michel Barnier will present the preferred ways to rectify the accounts on 1^Ahem October, during his general policy speech, his first political test before Parliament before the budget.

More generally, he blamed France’s poor financial health on “Massive and record public spending to respond to crises” Covid and inflation. This earned France an excessive deficit procedure before the European Commission, as did six other eurozone countries.

Speaking to the Assembly’s Finance Committee, Economy and Finance Minister Antoine Armand revealed that France had obtained a deadline from Brussels of 31 October to present its multiannual overview of public finances. The original deadline was 20 September. “My mission is to maintain a bond of trust with our partners and to present them with an economic and financial trajectory that is at the same time sustainable, coherent and credible”declared.