” Unlikely.” The term is used by rating agency Moody’s to refer to France’s aim to reduce the public deficit to 2.7% by 2027. And this, after announcing that the deficit would slide to 5.5% of GDP (Gross Domestic Product) in 2023. Rating agency eyes, such deterioration in public deficit” It makes it impossible » The government’s achievement of its deficit reduction objective,” provided in its medium-term budget plan presented in September », clarifies Moody’s in a press release this Wednesday.
The American agency, whose schedule provides for an update of the French rating on April 26, nevertheless confirmed that the opinion published on Wednesday was not strictly speaking a rating opinion.
Loss off the charts
The deficit figures released on Tuesday are not very good. The public deficit for 2023 remained thus “154.0 billion euros, or 5.5% of gross domestic product (GDP), followed by 4.8% in 2022 and 6.6% in 2021”. A far cry from the government’s forecast of 4.9%, further complicating the debt reduction objective outlined by France’s economy minister.
” This figure represents a loss of 15.8 billion euros compared to the latest forecast », suggested Thomas Cazeneuve, Minister of Public Accounts on the X Network.
However, this is not the first time that it has exceeded 5%: in fact the deficit reached 6.4% in 1993, 7.2% in 2009 and 9% in 2020. The larger-than-expected deficit is almost entirely due to lower-than-expected revenues », observes Moody’s.
This high loss The government’s medium-term budgetary strategy highlights underlying risks, based on optimistic economic and revenue assumptions as well as unprecedented spending cuts. », judges the rating agency.
In addition to the forecast for 2027, Moody’s also “ Unlikely » Despite announcing savings and additional cuts in the 2024 budget, the government is sticking to its deficit target of 4.4% this year. Reducing the deficit by one percent in a year, barring exceptional circumstances related to Covid, “ It has only been done once since 2000,” Remembers the agency.
France’s public debt will reach 110.6% of GDP at the end of 2023, the National Institute of Statistics and Economic Studies said on Tuesday. This is lower than in 2022, when it was at 111.9%, but almost one percentage point higher than the government forecast (109.7%).
Control costs
Bruno Le Maire though on Tuesday his ” Absolute determination » To return below 3% public deficit in 2027. And to meet the deficit, the government is trying to cut spending, even if then “ a little » Slowed down in 2023, with an increase of 3.7% compared to 4% in 2022, according to INSEE.
The executive has announced $10 billion in state spending cuts in 2024 and plans for an additional $20 billion in savings in 2025, this time with the Social Security Administration and communities contributing to the effort.
The rating agency estimates that an additional Rs 10 billion in savings in 2024 is insufficient for this. Bring the government back on track » Planned Budget. Worse, to achieve this 3% public deficit by 2027, the Court of Auditors is talking about savings of 50 billion by the end of Macron’s five-year term. The OFCE, for its part, mentions an effort of 70 to 80 billion euros.
The government for its part insists that it wants to avoid tax increases, despite the increasingly insistent demands of a certain majority of deputies. Assembly Speaker Yale Brown-Pivett (Renaissance) called the majority ” start thinking » On the undertaking companies “ Super Profit » or pour ” Superdividend ” The leader of the MoDem deputies, Jean-Paul Mattei, proposes to increase the rate of the flat-rate levy (” Flat tax “) on income from assets, a measure that will target the wealthiest taxpayers.
Bruno Le Maire, who initially shot down the idea, and who confirmed on Friday that the government was not considering taxing super profits other than energy companies, said: Open to discussions “
Notes in view
At least, it will be necessary to give guarantees before the ax of the rating agencies: Fitch and Moody’s on April 26 and especially S&P on May 31. A downgrade of France’s rating could raise interest rates at which the government refinances markets and make debt management more difficult.
Especially since Moody’s also expects public debt levels to rise again. Slowly Slowly » From 2024, exposing the country to interest-related costs » Never seen in 20 years ” Already according to the government, France must spend more than 74 billion euros in 2027 to pay interest on its debt, compared to 38.6 billion in 2023.
On Tuesday, the first president of the Court of Auditors, Pierre Moscovici, regretted the slippage “ Important “and” Very, very rare » France’s deficit. ” I’m not surprised now, we’ve been calculating this figure for a few days now, but it’s still a slippage in implementation that’s significant, not entirely unprecedented but very rare. “, he estimated during an interview with France Inter.
And as the campaign for the European elections begins on June 9, the opposition condemns this slippage in public finances, which, according to them, can only be attributed to the deterioration of the economic situation.
” We have never had such dire statistics », affirmed Marine Le Pen, President of the National Rally Deputies, ” Pathetic results “and” The incompetence of this government in the financial sector “
Similar accusations from the left of Deputy La France insomniaze Adrien Quatenance: “ These people are poor economists “WHO” Deficit and debt have increased to always give the same gift “and” French does not require lessons », he denounced on CNews and Europe 1.
(with AFP)
