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Is Gabriel Attal’s economic program financeable?

Between the maintenance of the promised tax cuts and the €12 billion in savings to be made in the 2024 budget, Prime Minister Gabriel Attal’s programme raises the question of its financing. For Christian Saint-Etienne, the main difficulty lies in the control of public spending

The Prime Minister’s general policy speech outlined a number of avenues to promote work, encourage the construction of housing, “rearm our health system”, act for schools and restore authority. The standards for farmers must be simplified, while the ecological transition will be accelerated by the creation of an ecological civic service and the commissioning of the Flamanville EPR.

In order to promote work, it is planned to reduce taxes on the middle classes by 2 billion euros while generalizing the reform of the RSA with an obligation of 15 hours of weekly integration activity. To revive construction, Mr. Attal proposes to integrate intermediate rental housing into the law on solidarity and urban renewal (SRU). It also wants to designate 20 ‘territories committed to housing’ with the aim of creating 30,000 new housing units within three years. The recurring theme of this speech is the need to simplify standards, in agriculture as well as for VSEs/SMEs. In particular, it advocates refocusing the work of the National Commission for Public Debate (CNDP) on projects of national scope in order to simplify the procedures affecting other projects.

Stifling standards and procedures

Mr. Attal is not the first ‘Prime Minister’ to commit to reforming and simplifying standards and procedures, which does not prevent the straitjacket of standards and procedures from constantly growing and stifling initiatives. Above all, he is facing a tense budgetary situation with a public deficit that remains above 4.5% of GDP, a debt that remains around 110% of GDP, so that his room for manoeuvre is reduced even if the measures he has announced do not deliberately worsen the situation of public finances.

The main difficulty still lies in controlling public spending which, according to the European Commission’s economic forecasts, will remain around 56% of GDP in 2024 and 2025, i.e. 8 points of GDP above the average public spending of the other 19 countries in the euro zone. The public deficit will not fall and will remain at 4.5% of GDP in 2024-2025, i.e. a third more than in the rest of the euro area, whereas it would need to be brought down to around 1.5% of GDP to trigger a real downward movement in the public debt burden. However, Mr. Attal’s programme does not remedy the unbearable burden of public spending and will not reduce the deficit.

The only victim of the double deficit

France is thus the only major country in the euro zone hit by the double deficit, that of public finances and that of the current account balance, which will remain around 2.4% of GDP in 2024 and 2025, as in 2023. One day we will have to halve the gap in public spending with our neighbours in the euro zone and allocate the 4 points of reduction in the public spending ratio to the reduction of the deficit and the reduction of taxes.

The economic situation in France remains extremely worrying, its performance lag compared to the other countries of the euro zone is worrying and the general policy speech of Mr. Attal, a very sympathetic character, does not outline prospects allowing the French economy to regain sustainable dynamism.

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