After saving 10 billion euros in 2024, Bercy aims for “at least” 20 billion more in 2025

Two weeks after revealing the broad outlines of 10 billion euros of additional savings in 2024, the government set the budget course for the coming months. Bruno Le Maire and Thomas Cazenave, his minister for the budget, were heard by the finance committee of the National Assembly and the Senate this Wednesday, March 6, who prepared ideas for new severe cuts in public spending. Overall, the savings could reach 30 billion euros between 2024 (10 billion euros) and 2025 (20 billion euros), split between the state and social security.

We remind you that the government has set itself the goal of reducing the public deficit to 4.9% in 2023 and 4.4% in 2024. However, Bruno Le Maire explained that the French public deficit “in 2023 it will be significantly above 5%. It was therefore necessary to react quickly and forcefully”. Faced with weaker-than-expected growth in 2023, the executive has had to deal with lower tax revenues, which last year totaled roughly 7.7 billion euros. Income from corporate tax (4.4 billion euros), VAT (-1.4 billion) and income (-1.4 billion) burdened the government’s budgetary ambitions.

The state budget and social security are in the red under the weight of stagnant incomes. And this situation is unlikely to improve. Most forecasting institutes have revised their growth for 2024 downwards to around 0.8%. The executive also lowered its forecast for this year from 1.4% to 1%. However, this projection remains above the consensus of economists.

Growth: INSEE expects a slow economic recovery in the first half of the year

Additional savings of up to 20 billion euros in 2025

After the government turned off the Covid aid tap and reduced the price shields for energy, it first reduced state spending (€10 billion). For 2024, the government is not stopping at new savings. “It will depend on tax revenue”, warned Bruno Le Maire before the members of the finance committee. Several ways were mentioned on the table, such as reimbursement of transport for the sick, allowed days of absence in communities, layering of levels in local government. The government could pass an amendment budget in the summer.

Debt: France is set to take on a colossal amount in 2024

As for 2025, Public Accounts Minister Thomas Cazenave announced a higher cut. “Given the results for 2023 and the revision of our growth forecasts for 2024, I have to tell you
transparency: draw up a budget for next year and meet our goal
to reduce the deficit below 3% by 2027 (…) we must make every effort
Additional savings of 12 to 20 billion euros for 2025 ».

Bercy’s services are currently undergoing the spending scalpel of various administrations as they prepare the 2025 budget. In the crosshairs of Treasury accountants is a long list of hot topics: business aid, youth measures, policy employment, vocational training and apprenticeships, medical devices, long-term illnesses, aid to cinematography, absence from public service, measures to control the Military Program Act, or even departmental expenditure on real estate under the Program Act.

Criticized method by decree

The announcement of €10 billion in budget cuts to state spending caused an uproar in the National Assembly. Lacking a majority in the lower house, the government passed a decree approving these savings. A method criticized by MPs but allowed by finance laws (LOLF) when it comes to government spending. “Savings must be targeted, considered and voted on by Parliament, not decided on the corner of the table in Bercy”lamented MP (LIOT) Charles de Courson at the end of February.

In the National Assembly, Gabriel Attal promises to “unlock” the French economy

“Never before has the government imposed such a reduction without an amending Finance Act”(PLFR) recalled Eric Coquerel at X (ex-Twitter). “It’s a democratic problem, the National Assembly will almost find itself face to face with a redone budget”. Around twenty deputies, the Republicans also wrote to Prime Minister Gabriel Attala to condemn a “serious circumvention of parliament »it goes so far as to qualify it as “democratic scandal”.

Budget under the supervision of rating agencies

Under the radar of rating agencies, France embarked on a restrictive budget overhaul. Like last year, the executive is worried about a red card from financial agencies in the coming weeks. Fitch and Moody’s verdict expected on April 26, S&P Global verdict Evaluation 31 May, just before the European elections.

A warning before the election would be synonymous with the failure of a government committed to providing financial players with guarantees of budgetary integrity. In the spring of 2023, the government justified the controversial pension reform by threatening to downgrade the rating agencies. Despite the approval of this extensive reform, Fitch still downgraded France. These agencies, which have been criticized for their methods since the severe financial crisis of 2008, have lost their influence. For the executive, however, they remain a way to keep the sword of Damocles over the budget at a time when the state must borrow a colossal amount in 2024.

Unemployment insurance in Bercy’s crosshairs

Due to insufficient economic growth, the labor market shows signs of running out of steam from 2023. The unemployment rate, as defined by the International Labor Office (ILO), rose to 7.5% at the end of 2023, compared to 7.1% in January. The goal of full employment, which has become a priority goal of Macron’s five-year term, appears increasingly difficult to maintain. Most forecasting institutes expect unemployment to rise in the coming months. In this context, the government plans to tighten its tone on unemployment insurance.

Unemployment insurance: Bruno Le Maire calls for “definitive” state takeover

After tightening the conditions of access to unemployment insurance and adjusting the compensation calculation, Bercy is working on a new turn of the screw. In an interview with WorldIn particular, the Minister of Economy mentioned the period of compensation for job seekers, which is currently set at a maximum of 18 months. Which would be a path to substantial savings for the executive. We remind you that the deficit of the insurance system is part of the deficit of public finances, which is taken into account by the European Commission.

Bruno Le Maire was also in favor of a “definitive” takeover of the unemployment insurance system by the state. Unsurprisingly, this proposal for “state ownership” of Unedic already appeared in Emmanuel Macron’s economic program in 2017. At that time, the presidential candidate announced that he wanted to suppress the unions, the pillars of parity in France. Such a reform could support the unions and a large part of French employers, who are heavily dependent on this insurance system.

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