The battered French accounts received a small oxygen bomb in the final stretch of the year 2024. A small relief comes to Bercy (as the French Ministry of Economy is known) after an improvement in revenues that recovered 6.4 billion euros to the public treasury.
As reported by the French Minister of Economy, Eric Lombard, in the Council of Ministers, the state deficit is lower than expected compared to the forecasts for the end of the management financing law (LFG) 2024. Unlike Spain , in France they prepare a law for closing the fiscal year in which forecasts are made and accounts are given for what was dispensed during the fiscal year, where you can see if what was planned has been received and what was budgeted has been spent.
Thus, the budget balance corresponding only to the State deficit, that is, the social sphere is excluded, reached 156 billion euros last yearcompared to the 163,000 that were foreseen in the law at the end of the administration.
According to the French newspaper Les EchosCiting internal sources, Bercy still maintains the forecasts of a public deficit of 6.1% of GDP for the fiscal year 2024, a figure that doubles what is required by Brussels and is higher than the objective set in the 2024 Budgets. , which set it at 4.4% of GDP.
Despite this small improvement in income, France’s financial situation remains alarming and needs to be corrected both from the point of view of cutting spending and increasing income. In this sense, public spending is 1,700 million less than expected in the LFG and 7.2 billion euros less than what was anticipated in the initial budget.
Therefore, the spending cut measures imposed by the previous Prime Minister Gabriel Attal, before the Legislative elections were called, were having an effect, but not as expected. Likewise, his predecessor, Elisabeth Borne, had also started a campaign to cut spending in the ministries.
According to Bercy, this reduction in spending is due to a “stricter direction” of budget programs through the cancellation of credits and the “prudent” use of the preventive reserve.
Likewise, State income reached 281.2 billion euros, this means that they were 1.5 billion euros higher than the forecasts of the 2024 Budgets, reported by the Ministry.
By breakdown, they point to an increase in the Inheritance Tax of 500 million euros and VAT revenues higher than expected by 1,100 million, although it is still lower than expected in the General Budgets. For its part, personal income tax and corporate income are in line with expectations.
Brussels approval
Likewise, the French Minister of Finance, Eric Lombard, assured that he has the support of Brussels for his deficit reduction plan. This implies that his Government looks stronger when it comes to carrying out its Budget project that promotes massive spending cuts to repair the battered public finances.
The new administration, in the hands of François Bayrou after his predecessor, Michel Barnier, was censured after six months in office, set its deficit target at 5.4% for this year, with the aim of “incentivizing growth economic,” Lombard himself said days after being appointed. Thus, they are framed in a less ambitious deficit objective than Barnier. This decision is made after having revised downwards the GDP expansion for 2024, specifically from 1% to 0.9%.
The line to follow is the same as the previous brief administration: cutting public spending and increasing taxes worth 53 billion euros.
The fact that Brussels has approved this path means that Bayrou is protected when it comes to restoring investor confidence and finding the support of a completely fragmented National Assembly.
“The budget that we have presented responds, above all, to the interest of our country,” Lombard told the media after holding a Eurogroup meeting. He reiterated that it is not possible “to leave such a level of debt and deficit to our children and grandchildren.”
Bayrou still has an arduous path within the National Assembly, the opposition is not making it easy for him with its budget plans. Although it has many more possibilities of moving them forward after the indirect support of some socialist deputies. Until the Budget is passed, France operates under an ’emergency law’ that extends those of the previous year.
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