Deficit: France still wants to return to European targets by 2029

The day after Prime Minister François Bayrou warned of the debt "trap" that threatens "the survival of the country," Economy Minister Eric Lombard presented the progress report on France's budgetary trajectory, slightly adjusted compared to October, citing "significant uncertainties" linked to US customs duties at the end of the cabinet meeting.

In 2024, the public deficit widened to 5,8% of gross domestic product (GDP). The government hopes to reduce it to 5,4% this year, at the cost of a budgetary effort of around fifty billion euros, recently reinforced by an additional five billion.

He then intends to reduce it to 4,6% in 2026 through a new effort estimated at €40 billion. This would be based primarily on a reduction in spending, which Eric Lombard hopes will be equitable between the State, Social Security, and local authorities, while the possibility of a tax increase for households or businesses has been ruled out.

"A little better"

Currently the highest in the Eurozone, the French public deficit would continue to decline thereafter, to 4,1% of GDP in 2027 and 3,4% in 2028.

The objective, which remains unchanged, is to return below the 3% ceiling authorized by European budgetary rules, but later than the rest of the eurozone, with a target of 2,8% in 2029.

"It's not just a question of figures, it's first and foremost a question of sovereignty: financial sovereignty, strategic sovereignty," stressed the Minister of Public Accounts, Amélie de Montchalin.

Regarding the growth forecast, already cut to 0,7% for 2025 after 1,1% last year, the government is counting on a GDP increase of 1,2% in 2026 (compared to 1,4% hoped for in October), in a difficult environment, both internationally and in France, where the threat of censure of the government by LFI and the RN, unhappy with the budgetary announcements, is resurfacing in the National Assembly.

Growth would then reach 1,4% in 2027 (compared to 1,5% previously forecast), as in 2028, and 1,2% in 2029.

Pierre Moscovici, First President of the Court of Auditors and President of the High Council of Public Finances, said on Wednesday that the 2025 budget was "a little better" than that of 2024, which he denounced as "erratic" by the teams at Bercy, led in particular by former Minister Bruno Le Maire.

The growth forecast for this year "is not out of reach, even if the risks linked to the international situation and geopolitical uncertainty are high," he said.

The deficit forecast can also be "maintained, but is far from being achieved," according to the HCFP, because it requires "strict control of expenditure."

Tax cuts?

On Tuesday, after a "budget alert committee," François Bayrou warned that the cost of the debt, which stands at around sixty billion euros this year, the equivalent of the defense or national education budget, risks soaring to 100 billion by 2029.

Public debt reached 113% of GDP in 2024, or €3.305,3 billion. In the eurozone, only Greece and Italy have higher debt levels. French debt is expected to continue rising to 118,1% of GDP in 2027 before gradually declining to 117,2% in 2029.

Required effort from retirees? Increased VAT? While the Prime Minister has promised to unveil the "major choices" of the next budget before July 14, following a "no-holds-barred" dialogue ahead of the budget debates in the fall, some avenues have begun to emerge.

Amélie de Montchalin mentioned the elimination of those deemed unnecessary among the 467 tax loopholes worth €85 billion. While this brings in "a lot of money" for the state, it could translate into tax cuts "for a certain number of French people and businesses," she said.

The minister also wants to make work more profitable, without saying how, and to bring 15 billion euros into the state coffers by intensifying the fight against fraud.