Not a minute of grace for the next prime minister and his future government. Before even thinking about the state budget for 2025, which should in principle be finalized by mid-September and then debated in Parliament from 1Ahem In October, the new executive will be faced with an unexpected slide in public finances. And will have to urgently decide what measures to take or not. This is evident from the note that Bruno Le Maire, the resigning Minister of the Economy, and Thomas Cazenave, his Minister of Public Accounts, sent on September 2 to the parliamentary members of the Finance Committee of the Assembly and the Senate.
“There is a serious slip in public finances,” We recognise this at Bercy. For Bruno Le Maire, there is no other solution than to act quickly with strong gestures. He recommends immediate savings of 16 billion euros in the budget for the current year. This is what he intends to say to the future Prime Minister, as soon as he is appointed.
The alarm can be summed up in one figure: 5.6% of gross domestic product (GDP). This is the record level that the public deficit risks reaching this year, according to the latest assessment carried out by the Treasury Department in Bercy. After peaking at 5.5% of GDP in 2023, the threshold that led the European Union to launch an excessive deficit procedure targeting France, this balance was supposed to decrease year after year. It would return to 5.1% in 2024 and fall to 3%, the maximum normally allowed by European rules, in 2027.
Tax revenues lower than expected
However, if nothing is done, this public deficit is likely to continue to increase slightly rather than start to decrease, as we fear at Bercy. This would obviously be an execrable signal for both the European Union and investors. Enough to bridge the gap in rates between French and German ten-year yields, a measure of the confidence – or distrust – of the markets towards France.
What happened? Two simultaneous movements, according to the letter from the resigning ministers to the parliamentarians. Firstly, the tax revenues collected since the beginning of the year turn out to be slightly lower than expected, as was already the case in 2023. “VAT, income tax and corporate tax revenues could be lower than expected” write, without giving a precise figure, the two ministers about to leave Bercy. France’s growth, however, should be in line with expectations, close to 1% or 1.1% in 2024. But this growth is proving to be “less favorable for tax revenues” than expected, they say.
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