France is launching a budgetary adjustment campaign with which it aims to save 60 billion euros and the first official announcement made was to postpone the revaluation of pensions from January 1, 2025 to July 1.
Assured government sources elEconomista.es that it is a postponement and that they will not be frozen. As the head of the Economy of the TF1 television channel explains, postponing the indexation of pensions from January 1 to July 1 means saving six months, which represents “a total of 4 billion euros, of which the State receives the majority, close to 3 billion”.
According to the expert, this is “a significant contribution to the efforts we will have to make next year, as the State looks for ways to save billions of euros.” At the start of this year, basic pensions in France increased by 5.3% due to their indexation to inflation.
A source from Bercy (as the French Ministry of Economy and Finance is called) confirmed to this newspaper that the Executive intends to achieve a deficit target of 5% of GDP by 2025. Even if it is planned that this year, according to estimates from the tax authorities and the government itself, close with an accounting overdraft of between 6% and 6.1%.
Next week the French executive is expected to present the 2025 budgets, which will include a major package of public spending reduction measures and “temporary” tax increases that will save them €60 billion. euros and thus double the deficit to the Path to 3%. It should be remembered that Brussels sets the deadline for member countries to do this in 2027, but Paris has already started discussions with the Commission to postpone them to 2029.
In his speech before the National Assembly, the conservative Michel Barnier assured that two thirds of this budgetary effort would come from “reductions in public spending”, or nearly 40 billion euros, while the rest (less than 20 billion ) would come from increasing taxes on large businesses and fortunes, among others.
For the moment, the Barnier cabinet is still keeping secret what this new taxation will be “on the richest”, which the Minister of the Economy, Antonie Armand, strives to repeat in each “temporary” interview.
But from what they said this week in the paper The Parisianfrom Bercy they plan to triple the exceptional contribution for the richest with which They want to raise 3 billion eurosAt the same time, they will increase the tax rate for large companies that earn more than a billion euros from 25 to 33%, which will increase up to 8 billion. In addition, they plan an increase of 3 billion euros in the electricity tax and another 3 billion for energy companies and share buybacks.
With this reduction in public spending of more than 40 billion euros, state exemptions on GDP would go from 56.8% this year to 56.3% in 2025. However, it is still the highest public expenditure in the EU, where the average is around 49%. It should be remembered that since 2019, French public spending has increased by 200 billion euros and that last year it increased by 16 billion, as reported by the former Minister of Finance, Bruno Le Maire.
These budgets that the French government will present forecast GDP growth of 1.1% in 2025 after 1.1% that it forecasts in 2024. On the other hand, average inflation would be 1.8%, compared to 2.1%. with which we hope to close this exercise. In terms of income and expenditure, they predict that waivers will amount to 1.7 billion euros next year and revenues to 1.56 billion.
In addition to the delay in the revaluation of pensions, Bercy also mentioned cuts in health spending, reducing it from 3.2% this year to 2.8% next year. Of course, they specify that approximately half of the reduction of these 40 billion will come from the central administration, while the rest will come from municipalities and Social Security savings.
It’s not going to be easy
The draft general budget should be presented on October 10 to the National Assembly for debate and possible amendments. Barnier is confident in his career as a negotiator, it must be taken into account that he was responsible for leading the negotiations between the EU and the United Kingdom after Brexit, although it will be a difficult debate since he did not no majority in the Lower House.
Despite everything, in the absence of consensus, it is possible to resort to the constitutional tool which avoids the vote, as was used during the pension reform. The Magna Carta allows the text to be approved directly after prior deliberation by the Council of Ministers. This article says that only approval can be withdrawn if they present “a motion of censure within the next 24 hours”. The condition is that this motion is signed by at least one tenth of the National Assembly.
Antonie Armand keeps repeating that temporary tax increases “will only concern” the richest classes in the country and businesses with a significant volume of income. In an interview on RTL this Wednesday morning, the head of the Ministry of the Economy reiterated that “in general”, income tax rates will not be changed and that taxes will not be increased “from classes middle and higher” of France. . On the other hand, regarding businesses, he reiterated that his measures will not affect SMEs “which are very exposed at the moment”, he reiterated.
