France rejects austerity with gradual repair of finances

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France's long-term fiscal plan


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Photographer: Dario Pignatelli

France will only gradually repair the damage to its public finances caused by the pandemic, avoiding austerity measures that would hurt economic growth, according to a long-term budget plan.

The budget deficit will not fall below 3% of gross domestic product until 2027, the finance ministry said. While progress could have been faster, targeting a decline below 3% in 2025, it would have involved significant spending cuts and tax increases, a ministry official said.

“We must not make the mistake of 2009 when we tried to immediately repair public finances,” Finance Minister Bruno Le Maire said on Sud Radio on Friday. “We have to do it at the right time so as not to kill the return to growth.”

The plan will be presented to the European Commission later this month.

2019 2020 2021 2022 2023 2024 2025 2026 2027
GDP growth 1,5% -8,2% 5% 4% 2,3% 1,5% 1,4% 1,4% 1,4%
Déficit / PIB 3,1% 9,2% 9% 5,3% 4,4% 3,9% 3,5% 3,2% 2,8%
This / PIB 97,6% 115,7% 117,8% 116,3% 117,2% 118% 118,3% 118,2% 117,7%

France will commit to keeping taxes unchanged and will limit annual spending increases to 0.7% on average over the course of the plan. This would already be stricter than the average 1% increase so far under the presidency of Emmanuel Macron, and the 1.4% before that, the official said.

“Raising taxes would weaken the return to growth, it would ruin confidence,” said Le Maire. “We have to find other solutions.”

France will need to undertake structural reforms, including an overhaul of its pension system once the economy is in better shape again, Le Maire said. He also wants to set a spending target over five years.

(Addition of comments by Minister of Finance Bruno Le Maire from the third paragraph)

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