Not a minute of respite will be granted to France's next prime minister and their future government. Even before they consider the 2025 state budget, the draft of which is due, in theory, to be finalized in mid-September and debated by Parliament from October 1, the new government will be faced with an unforeseen rise in the public deficit – and will have to urgently decide whether or not to take action.
These are the conclusions from a document sent on Monday, September 2, by Bruno Le Maire, the outgoing government's finance minister, and Thomas Cazenave, his minister for public accounts, to the members of the finance committees of both chambers of Parliament.
"There is a serious slippage in public finances," acknowledged a source at the Finance Ministry. According to Le Maire, who says he did not cause the situation, there is now no other solution than to act quickly with strong measures. He recommended immediate savings totaling €16 billion to be cut from the current year's budget. This is what he intends to tell the country's future prime minister, as soon as they are appointed.
"They give economics lessons to the whole world and accuse us of wanting to impoverish France, but they are driving the country into the wall," radical left-wing La France Insoumise MP Manuel Bompard immediately reacted, on X.
The warning can be summed up in one figure: 5.6% of gross domestic product (GDP). This is the record level that the public deficit could risk reaching this year, according to the latest assessment by the Finance Ministry's treasury department. After peaking at 5.5 % of GDP in 2023, a threshold that prompted the European Union (EU) to initiate an excessive deficit procedure against France, this sum was expected to decline year on year. It was due to get back to 5.1% in 2024; and then fall back to 3%, the maximum normally authorized under the European rules, in 2027.
Moreover, sources at the Finance Ministry fear that, if nothing is done, the public deficit will continue to rise, rather than start to drop. This would, of course, send an abysmal signal to both the EU and to investors. It would be enough to push up the spread between French and German 10-year bond yields, a measure of the markets' confidence in – or distrust of – France.
What happened? There are two simultaneous factors, according to the outgoing ministers' letter to parliamentarians. Firstly, tax revenues since the start of the year have proven to be a little lower than forecast, as was already the case in 2023. "VAT, income tax and corporate income tax receipts could be lower than forecast," wrote the two ministers.
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