In his speech on October 1st, Prime Minister Michel Barnier acknowledged the massive public debt and proposed a significant reduction in public spending. He also suggested seeking contributions from large profitable companies and an exceptional contribution from the wealthiest French citizens. This aligns with the views of economists Adrien Auclert, Thomas Philippon, and Xavier Ragot, who advocate for reducing the structural primary deficit by 4 percentage points of GDP over seven to twelve years, starting with 20 billion euros this year through spending cuts.
While not ruling out temporary tax increases, these economists also recommend reevaluating corporate tax breaks and subsidies. Currently, tax breaks for the wealthiest households and large companies cost the state 76 billion euros annually, with subsidies to companies totaling around 170 billion euros. This suggests that there is room for adjustments in spending. However, the emphasis remains on cutting public spending in areas such as public services, healthcare funding, and private health insurance.
These economists also propose aiming for a primary surplus in the medium term in order to reduce debt, arguing that sustained budget surpluses are necessary for debt reduction. This essentially amounts to a significant and prolonged austerity program, despite their claims of seeking a balanced approach to adjustment speed. However, their analysis overlooks the current economic and societal conditions in France and Europe, as both regions are facing economic stagnation and other challenges.
Implementing austerity measures, especially on a European scale, in the current economic climate may worsen the situation rather than improve it. With business investments at a low point and household consumption stagnating, cutting public spending could have a negative impact on the economy and ultimately worsen public finances. This is a well-known phenomenon, as evidenced by the difficulties faced by Greece after implementing austerity measures.
In conclusion, while the government is aiming to address the public deficit through spending cuts and additional contributions from profitable sectors, there are concerns about the potential negative impact on the economy and society. The proposed austerity measures may not be the most effective solution in the current economic context, and alternative strategies should be considered to foster economic growth and stability. By taking into account the broader economic and social aspects, policymakers can better assess the implications of their decisions on the overall well-being of the population.
