“The finance bill for 2025 will be the most brutal since the financial crisis. It will take political courage and intelligence.” On the occasion of the annual report of the Court of Auditors, this Tuesday, its first president Pierre Moscovici announces the color. And she is far from cheerful. “The situation of public finances is worrying, or even beyond,” worries the former Minister of the Economy.

Since the start of the year, the tempo of billions in savings to be made to meet deficit reduction commitments has accelerated, for a government which is starting to have difficulty keeping up. The announcement of the 10 billion credit freeze plan for 2024 by the Minister of the Economy, Bruno Le Maire, less than a month ago, was triggered by that of his Minister for the Budget, Thomas Cazenave, which is counting on 20 billion cuts needed in 2025 (instead of the 12 billion initially announced) to meet the objectives in next year’s budget, which will be presented in September.

Less than a week later, this Tuesday, the Court of Auditors went further by calculating in its annual report that, by 2027, total spending will have to reach 50 billion if the government wants to keep its promise to bring the deficit below 3% in 3 years. “A year ago, we were already saying that we needed to make 50 billion savings to maintain our multi-year trajectory. Today, we still need these 50 billion – or even a little more -, while nothing has been done in 2023. We have just spent a blank year on reducing the deficit”, criticizes Pierre Moscovici, first president of the Court of Auditors, who laments: “our budgetary trajectory by 2027 was already not flamboyant, now we are starting it with a false start”.

In 2023 the government’s ambition was to contain the increase in the deficit to 4.9% of GDP after 4.7% in 2022. This objective will be, by Bruno Le Maire’s own admission, “significantly” exceeded (the INSEE’s verdict is expected at the end of March), in particular because of tax revenues 7.7 billion below expectations. The march will thus be “even higher” for the year 2024 which should see the deficit fall to 4.4%. This objective is today considered “optimistic, even difficult to achieve” by the Court, even taking into account the 10 billion savings plan recently decreed. Note, moreover, that since the revision of its growth forecast for 2024 (lowered from 1.4% to 1%), the government no longer mentions this objective.

To avoid too severe a slippage, Bercy is seriously considering passing a supplementary finance bill (PLFR) to parliament after the European elections in order to further eliminate appropriations for the current year. In any case, the government will be forced to find in 2024 the budget cuts it must make for next year. “Making savings of 20 billion is very complicated,” judges Pierre Moscovici. But, in any case, the government cannot not do it. It might be brutal because it hasn’t been done before. “It will take political courage and intelligence.”

If the government is at this point against the wall, it is in particular because of the interest burden on the debt (which should peak at around 3,200 billion at the end of the year, according to the Court) which is exploding with an increase of 10 billion expected in 2024. “Savings will be all the more difficult to achieve as the debt burden increases,” comments the first president. Between concerns about France’s rating and those about the political climate, “we forget to talk about the main actor in this story: the market”, underlines Pierre Moscovici.

The government, to respect its budgetary trajectory, will have to swim against a strong current – that of the increase in public spending which continues to progress significantly in 2024, under the effect of the State budget which displays more than 3.1% increase and that of social security expected at 2% growth in particular because of the indexation of pensions and social benefits (for a cost estimated at 25 billion) and health spending also on the rise. However, the control of public spending promised by the executive, “will require the implementation of considerable efforts” from this year, “contrary to what was planned” in the finance law, tackles the Court of Auditors which judges that the government strategy “must be better supported”. “For 2024, we must identify the 10 billion credits that will be canceled and for 2025, we must document the 20 billion in savings,” summarizes Pierre Moscovici. For this second challenge, Bercy continues to refer the identification of future savings to the “expenditure review” which will deliver its conclusions in the coming weeks. But, a year after its launch, the Court harshly judges this system which displays a “disappointing” result for its first exercise.

“Beyond just spending reviews, the necessary savings effort must preserve spending likely to sustainably support economic activity,” she adds. Because the government’s economic and budgetary room for maneuver is, so to speak, non-existent, according to the institution. “Any bad macroeconomic surprise from 2024 or any budgetary achievement below the ambitions displayed would cause a deviation from the trajectory”, that is to say from the objective of returning below 3% in 3 years, warns the report. For example, from 2024, if growth rose to only 0.7% – a figure closer to the economic consensus than the government’s forecast – this would result, all things being equal, in a public deficit of 3. 1% of GDP in 2027, develop the Court’s experts.

This scenario would be a catastrophe for the European credibility of France which, even if it managed to meet its objective of reducing deficits, “would remain among the countries with the most degraded situation in the euro zone”, laments Pierre Moscovici .