French budget deficit worsens

Eddie Sammon Investments

What has happened to the French budget deficit? 

The French budget deficits for 2023 and 2024 have been reviewed and the 2023 deficit is estimated to be 5,5% of GDP rather than the 4.9% initially estimated. The 2024 the deficit is now estimated to be 5.1% rather than 4.4% initially expected. The government now wants to find 10 billion euros more, on top of the €10 billion of cuts already announced in February. The plan is to reduce the deficit to below 3% for 2027 in order to meet France’s requirements as a Eurozone member (countries which have the Euro as their official currency).


How could French budget deficit be reduced? 

The French government’s finance minister, Bruno Le Maire, wants to make 5 billion of government department cuts, suggesting cutting government property and office costs. He also plans to ask the French national cinema centre (Centre national du cinéma) and the French business and export agency, Business France, to find ways to make economies, along with other departments.


Bruno Le Maire also wants the French local and regional governments (collectivités territoriales) to limit their expenses by 2.5 billion euros but many have suffered a large fall in revenue after the local government property tax (taxe d’habitation) was removed for people’s main residences. Many local governments have also been increasing the property owner’s tax (taxe foncière) to compensate for this.


For the remaining €2.5 billion, the French government intends to increase taxes on electricity companies and on publicly listed companies who purchase their own shares. There are those that suggest that publicly listed companies artificially inflate their own share prices when they purchase their own shares and that they could pay higher salaries instead, but there are others who defend it as a vote of confidence in the future of the company by the board of directors, indicating that they think the company is undervalued and making the future performance of the business even more important to its shareholders as they could have purchased the shares of a different company or paid out the additional funds in dividends.


Could France’s finance minister, Bruno Le Maire, be sacked? 

The French President, Emmanuel Macron, was reportedly not very happy with the news of the worse than expected deficit numbers and apparently told his finance minister that “But Bruno, you’ve been here for seven years!”. Bruno Le Maire has also complained that “everyone says that Macron doesn’t like me” and Macron also wasn’t happy when Bruno Le Maire published a controversial novel in 2023. Therefore, it looks like his days could be numbered.


How does the French budget deficit compare to other Eurozone countries? 

In the third quarter of 2023, France’s deficit was estimated to be 4.8% of GDP, compared to a Eurozone average of 2.8% and the Eurozone maximum of 3%. However, allowances have been made in recent years due to the additional costs of the Covid-19 pandemic and the Russian invasion of Ukraine.


Some Eurozone countries, such as Cyprus, Croatia and Portugal have budget surpluses of between 2% and 2.6%. Other Eurozone countries have larger deficits than France, such as Italy at approximately 7%.


How can Aisa International help with your personal finances? 

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