The new French government led by Minister of Economy Eric Lombard has both good and bad news to share regarding public finances. The good news is that the French public deficit for the year 2024 is expected to reach 6.1% of the Gross Domestic Product (GDP), which is slightly higher than the initial target of 4.4%, but within expectations and without any further increase in the final weeks of the year. This was achieved through controlled public spending and revenues that are in line with projections.
However, the bad news is that the government’s target for 2025 set by former Prime Minister Barnier to reduce the public deficit to 5% of the GDP is no longer considered achievable. The current executive believes it will be “around 5%, a little more than 5%,” as stated by François Bayrou on December 23, 2024. A specific target has now been set to limit the deficit of the State, local authorities, and Social Security to 5.4% of the GDP in 2025. The Ministry of Economy has not officially confirmed this figure, stating that it is still subject to further discussions and will be announced with the budget presentation.
The government’s fiscal challenges have prompted discussions about the need for additional measures to control public spending and boost revenues. Some experts have raised concerns about the impact of the growing deficit on France’s debt levels and economic stability. The government is facing pressure to find a balance between addressing the deficit and ensuring continued economic growth and stability.
In response to the fiscal challenges, the government is considering various options to address the deficit and stabilize public finances. These options may include both spending cuts and revenue-raising measures in order to meet the new deficit targets for 2025. The government will need to carefully balance these measures to avoid negative impacts on economic growth and social welfare programs.
Overall, the French government is focused on addressing the challenges posed by the public deficit and ensuring fiscal stability in the coming years. While the deficit for 2024 is within expectations, there is recognition that further efforts will be needed to meet the revised targets for 2025. The government’s ability to implement effective fiscal policies and manage public finances will be crucial in determining France’s economic trajectory in the years ahead.
