26 Sep 2022
The French government is set to unveil a budget on Monday aiming to boost President Emmanuel Macron’s fiscal credibility, despite additional spending to soften the blow of energy price shocks.
Following massive spending during the pandemic, Macron has devised an economic plan for his second term, focused on keeping the deficit under 5% of economic output in 2023, and under the EU’s ceiling by 2027, Bloomberg reports.
The government has already allocated €16 billion in next year’s budget to stop energy bills rising more than 15%. Moreover, this latest budget will delay tax cuts to maintain government revenues and stay on track with the deficit goal.
Ahead of the presentation of the fiscal plans to cabinet, senior member of the National Assembly’s finance committee, Jean-Rene Cazeneuve said the target “is a red line we must not cross.”
In addition, after Macron lost his absolute majority in parliament in the June elections, political risks in regard to next year’s budget have increased. If the government doesn’t receive support from some opposition lawmakers, Prime Minister Elisabeth Borne will likely have to revert to article 49.3, allowing bills to pass without votes.
However, Budget Minister Gabriel Attal said during an interview with French newspaper JDD at the weekend that opposition parties will unlikely support the budget on principle. “The oppositions have themselves said that 49.3 is probable,” Attal said. “Whatever happens, France can’t do without a budget.”
The Budget Minister also said public debt will rise over €3 trillion “in the coming weeks”; debt servicing will cost the country €51.7 billion in 2023; whilst the government aims to reduce spending from 57.6% of GDP to 53.8% by 2027.
Furthermore, divisions may increase should the government include an amendment to increase the retirement age, rather than negotiate a reform with opposition parties and unions, the Bloomberg report adds. According to ministers last week, Macron could still opt for this route.