France warned to expect more government cuts

Government ministers in France have warned the country faces far-reaching cuts because the national budget deficit is even higher than anticipated.

In an interview with Le Monde newspaper, Finance Minister Bruno Le Maire said France was "very far from austerity", but in the short term, "we simply have to cool the machine".

"Growth is suffering the consequences of the new geopolitical environment and tax revenues are decreasing," he explained. "When you earn less, you spend less."

A so-called emergency brake of cuts worth 10 billion euros ($10.9 billion) had already been penciled in for the coming year, but now further cuts of at least 12 billion euros will be needed the year after, with Budget Minister Thomas Cazeneuve warning that the final figure could reach as high as 20 billion euros.

"We are making a single choice: to restore public finances. This must take us below a 3 percent public deficit by 2027," Le Maire said. "Reducing state spending by 10 billion euros is a first step. We are doing this without calling into question the major public policies championed by (President Emmanuel Macron): the environment, education, health, and labor have all seen their budgets increase since 2017."

Le Maire also told lawmakers this week that for many years France had been "addicted to public spending".

Pierre Moscovici, the head of the country's auditing body, the Cour des Comptes, called its public finances "worrying", picking out the aftermath of the pandemic and turbulent global energy prices as factors that had "propelled our public debt to historic levels", with policies pursued in the name of a political philosophy referred to as "whatever it takes".

"While the effects of the COVID crisis are fading, the year 2023 did not reverse this trend," said Moscovici, in a speech in January, adding that cautious debt reduction figures proposed by the government "gives rise to legitimate concerns about France's debt".

In April 2023, credit ratings agency Fitch downgraded France's rating from AA to AA-, citing "political deadlock and (sometimes violent) social movements" that posed a risk to Macron's reform policies.

In June, France narrowly escaped being downgraded by Standard and Poor.

Le Maire put a brave face on the current economic challenges, however, insisting "we'll get over it", and that now was an opportunity to "change our way of thinking: Public spending is not the alpha and omega of growth."

julian@mail.chinadailyuk.com