French govt. to further tighten spending

25 May 2023

France's government is set to freeze 1% of the budget for each ministry for the present year within plans to reduce its deficit, according to a statement by the finance ministry.

This measure follows from a previous decision to cut 5% of the budget of each ministry, Reuters news agency reports.

French President Emmanuel Macron has been facing pressure over the country's debt levels since last month when rating agency Fitch downwardly revised France's sovereign credit rating to AA-, cautioning its fiscal metrics were "weaker than peers."

In addition, another major rating agency, Standard & Poor's, is scheduled to announce its rating in France at the beginning of next month.

The country's finance minister Bruno Le Maire said to the AFP news agency that he had suggested the further spending freeze to the prime minister "to meet our public finance commitments in 2023" of holding the deficit under 5% of gross domestic product.

Furthermore, the government forecast the country's public sector budget deficit to reach 4.9% of economic output in 2023, a rise from 4.7% last year, before progressively declining to under 3% in 2027.

That said, recent promises to hike vocational high school and disabled spending, along with unfunded tax reductions for the middle classes, have raised concerns over the government's forecast.

The finance minister stated that the 1% spending freeze was worth €1.8 billion to bring the total tightening to €10 billion in this year's budget, the Reuters report adds.

The finance ministry confirmed the measure to the news agency.