Coming back below a deficit representing only 3% of GDP in 2027 is “unambitious”, estimated the Court of Auditors, criticizing the government in particular for ratifying “a growing Social Security deficit”.
The situation is “worrying”, even “serious”: the Court of Auditors is criticizing the government for its management of public finances in the annual report that it will publish today, accusing it of an “improbable” initial scenario for 2024 and a “poor” trajectory. ambitious and fragile” on the public deficit.
On more than 700 pages, largely devoted to adaptation to climate change, around forty provides, as every year, an overall inventory of public finances. “For me, the situation is serious”, “beyond” just “worrying”, summarized Pierre Moscovici, first president of the financial jurisdiction, to the press.
The trajectory presented by the government in the public finance programming law (LPFP) for the years 2023 to 2027 “combines three weaknesses”, estimates the Court: “an overly optimistic macroeconomic scenario from 2024”, a “late return” of the deficit public sector below 3% of GDP in 2027 and “unprecedented but undocumented expenditure control efforts postponed to the 2025-2027 period”.
“Compliance with the public deficit objective of 4.4% of GDP for 2024 “is not guaranteed,” warned Pierre Moscovici, even with the recent cuts of ten billion euros in the budget of the State, taken into account in this report which gives a snapshot at the end of February 2024.
Initial growth forecast deemed “unlikely”
The Minister of the Economy Bruno Le Maire announced them in mid-February, at the same time as he lowered the French growth forecast for 2024 to 1%, compared to 1.4% initially retained when the budget was constructed – a macroeconomic scenario which the Court considers was “improbable” from the start.
These cancellations of credits were “imperative” but risk not being “sufficient to maintain the trajectory of the deficit”, estimated Nicolas Moscovici.
“The trajectory set by the government is unambitious and very fragile,” he also said in an interview with Echoes published Monday evening.
However, any delay taken this year “risks weakening, or even rendering obsolete, the trajectory” of returning the deficit below 3% in 2027, notes the report, which does not take into account the upward revision last Wednesday of the public deficit 2023, the government now estimating it “significantly” above the objective of 4.9% of GDP.
“No room for maneuver in the event of a less favorable scenario”
For the moment, Bercy has not revised its short or long term deficit objectives. But with the delay accumulated in 2023, “the gap to be closed is even greater”, warns the president of the Court of Auditors.
The trajectory between now and 2027, ratifying a 17.2 billion euros Social Security deficit and considered “unambitious” and “fragile”, according to the institution, “does not include any room for maneuver in the event of a less favorable scenario “, the report warns, judging the government forecasts of growth and full employment to still be optimistic.
Pierre Moscovici welcomed Wednesday’s announcement of 20 billion euros in savings for all public finances in 2025, while emphasizing that they are, as for the rest of the 50 billion euros in savings necessary by 2027, “at this stage not documented or substantiated”.
According to the Court of Auditors, they will be “all the more difficult” to achieve as “the increase in interest charges and numerous sectoral programming laws (Defense, Justice, Interior, Research) are already directing public spending upwards. “, in addition to future spending on the ecological transition.
Among the three most indebted countries in the euro zone
The Court of Auditors thus estimates that public finances “will remain among the most degraded in the euro zone in 2024”, risking exposing France “to difficult discussions with the Commission and its European partners”, including in the context of new rules under discussion.
With public debt forecast at 109.7% of GDP in 2024 and 108.1% in 2027, “we are firmly on the podium of the three most indebted countries in the euro zone”, regrets Pierre Moscovici. The other two countries on this podium at the end of 2023 are Greece and Italy, according to Eurostat.
Its jurisdiction therefore recommends “selectivity in spending and offsetting any additional spending or tax reduction with savings or increases in revenue”, and to prepare for “ambitious reforms”.
“There are considerable efforts to be made”, affirms Pierre Moscovici, the next finance bill (PLF) will be “the most difficult to achieve since the financial crisis”, requiring “courage and political will”.