In 2025, Germany's budget deficit will be around 2% of GDP, Spain's 2.6% of GDP and Italy's 3.4% of GDP, according to the latest forecasts from the European Commission. As for France, the latter is forecasting a public deficit of 5.3% of GDP (close to the government's target of 5.4% of GDP, down 0.7 GDP points from 2024).

France's projected public deficit will therefore be almost 3 points of GDP higher than the average of the other major European countries. And this result will only be achieved at the cost of €50 billion (1.9% of GDP) in cuts in public spending and higher taxes, on high-income earners, whose tax rate is very low, and on large corporations. It is feared that this budgetary strategy will lead to a significant slowdown in growth.

Normally, the budget "multiplier" (the effect on GDP of a variation in the public deficit) is estimated at around 0.7. Applied to a 0.7 points drop in the deficit, this multiplier would imply a loss of growth of almost 0.5 points of GDP (0.7 × 0.7 points). Additionally, this loss of growth induced by budgetary rigor is likely to continue for several years, as the plan is to reduce the public deficit until it reaches the level (around 2% of GDP) that allows the public debt ratio to be stabilized. The difficulty of this policy is clear: Weak growth makes it difficult to reduce the public deficit, and deficit reduction weakens growth.

In reality, France is essentially suffering from the weakness of its level of production, its level of GDP. On the one hand, while labor productivity was rising by 1% a year from 2002 to 2018, a break has suddenly appeared: From 2019 to the end of 2024, it has fallen by almost 4%. If the previous rate of productivity growth was maintained, GDP would today be 9% higher than it is; and if productivity in France simply evolved at the same rate as in other eurozone countries, GDP would today be 5% higher than it is.

How can things be turned around?

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