Here is a report that Michel Barnier would have done without. As the 2025 budget arrives for debate in the National Assembly, the French Observatory of Economic Conditions (OFCE) warns of the risks posed to the economy by this first major text from the new Prime Minister. It could halve French growth in 2025, without achieving its objective of reducing the public deficit, indicates a study published on Wednesday, October 16, by this independent research body, linked to the National Foundation for Political Sciences. An analysis that must be taken all the more seriously as it adds to and expands the conclusions of the first experts who examined the finance bill: the Higher Council of Public Finance and the American rating agency Fitch.
Like the High Council or the Assembly’s general budget rapporteur, Charles de Courson, OFCE specialists first question the presentation of the budget retained by the government. In their political communication, Michel Barnier and his ministers announce an effort of 60 billion euros, with two-thirds of spending reduction and one-third of tax increases. These deliberately impressive figures are based on a comparison between the planned 2025 budget and a hypothetical scenario in which no action would be taken.
For the OFCE, which analyzes the 2025 budget in a more classic way compared to the previous year, the upcoming movement revolves around 44 billion euros. An already substantial amount. “An effort of this magnitude has not been observed since the period 2012-2013”, underline the main authors of the study, Eric Heyer and Xavier Timbeau. But only a third of this adjustment would come from reducing public spending and two thirds from increasing income. Exactly the opposite of the proportion shown by the government.
Then and above all, the OFCE insists on the foreseeable impact of this budget on the economy. According to researchers’ calculations, the Barnier plan risks reducing growth by 0.8 points of gross domestic product (GDP) in 2025. The budget shock alone could halve the progression of economic activity, which would be reduced to 0.8%. A massive effect, much more marked than what the government foresees, which wants to believe that growth will remain stable at 1.1% in 2025.
Experts predict the loss of 130,000 jobs
And again, the OFCE only included in its forecasts the measures expressly included in the finance bill as it was transmitted to the Assembly. Economists have not taken into account the additional projects that the Government intends to propose through amendments, such as the increase in the tax on airline tickets and the additional €5 billion in public spending reductions. “Given the unstable political balance in the National Assembly, it seems prudent not to add these poorly documented measures,” they write. If this additional plan were adopted, the impact on growth would be even more violent and would reach 0.9 points of GDP.
You have 29.77% of this article left to read. The rest is reserved for subscribers.
