In response to the annual report of the French Court of Auditors on the situation and prospects of the country's public finances, which was published on Thursday 29 June, the French Prime Minister, Édouard Philippe, has pledged to “contain the deficit at 3% [of GDP) from this year” (our translation throughout).
“We will not do so by increasing taxes, but through savings”, the head of government added. He also announced that initial clarifications will be provided on Tuesday, in his general policy speech, and then during the guideline debate on public finances.
In its report, the Court of Auditors states that without appropriate economic measures, the French government deficit could stand 3.2% of GDP in 2017, or 0.4% above the target set by the previous government (see EUROPE 11767), and 0.2% over what the Commission announced on 11 May, when publishing its spring economic forecasts (see EUROPE 11786). These gaps could be explained by “slightly overestimated government income and manifestly undervalued public expenditure, particularly regarding the state”.
“The conclusions of the Court of Auditors are severe. Unequivocal. We are inheriting a divergence of €8 million. This is unacceptable”, the French Primer Minister tweeted, in a thinly veiled reference to the economic policy of the previous government.
In order to get the deficit below the 3% of GDP mark this year, the institution recommends “postponing or cancelling all measures to increase public expenditure not yet implemented and taking additional savings measures covering all public administrations”.
The Court is scarcely any more optimistic for 2018, stating that achieving the target of trimming 0.5 percentage points off GDP would require a stabilisation of expenditure in volume terms, although this is expected to increase.
Readers may recall that France needs to bring its deficit below 3% of GDP for two years if it is to come out of the excessive deficit procedure in place against it since 2007. (Original version in French by Lucas Tripoteau)