We explain why France’s budgetary situation is a poisoned chalice for the future government

The next Prime Minister appointed by Emmanuel Macron will have only a few weeks to present a text to the Assembly and find a majority to have it adopted.

Barely appointed, the next government will already have an emergency to deal with. While Emmanuel Macron has still not chosen the name of the future Prime Minister, Tuesday, September 3, almost two months after the early legislative elections that the president called in the wake of the European elections, warnings are multiplying around France’s 2025 budget. In addition to an unforeseen deterioration in the accounts in 2024, the next executive will have very little time to present its Finance Bill to Parliament. Franceinfo explains why the next budget has all the makings of a poisoned chalice.

Because the deficit is larger than expected

In a letter sent to parliamentarians on Monday and consulted by franceinfo, the resigning Minister of Finance Bruno Le Maire expressed concern about an unforeseen surge in local authority spending of 16 billion euros for the year 2024. Already lowered by “nearly 30 billion euros” In the spring, the tax revenue forecasts could also not be achieved given the growth “less favorable” than expected, fears the tenant of Bercy.

Result, the public deficit could reach 5.6% of gross domestic product (GDP) this year instead of the 5.1% hoped for. It would even widen to 6.2% of GDP in 2025 instead of 4.1%, if 60 billion euros of savings were not made next year, according to Bercy. A sum that the next government will have to find to close its 2025 budget by the end of the year, either by making budget cuts or by increasing state resources.

If the next executive does nothing, the deficit will mechanically worsen, which risks attracting the wrath of the European Union, already in conflict with Paris on this subject.

Because France must straighten out its finances

Another difficulty awaits the next tenant of Bercy. France must present by September 20 its financial recovery plan until 2027 to the European Union. The European Commission in fact put Paris on formal notice for excessive deficit procedure on July 26.

France and six other countries actually exceeded the public deficit limit set at 3% of GDP by the Stability Pact, which also limits debt to 60% of GDP. According to European treaties, these member states must therefore reduce their deficit by 0.5% of GDP per year. The EU is therefore asking France to return below the 3% mark by 2027.

If the new government sends its trajectory to the European Commission in time, the latter will then communicate in November detailed assessments of this plan containing “recommendations to Member States to take effective measures to correct their deficits.” The commitments of the future government will also be scrutinized by the financial markets.

Because the budget must be voted on before the end of the year

The draft finance bill should normally be sent to parliamentarians “no later than the first Tuesday in October of the year preceding the year in which the budget is implemented”, or October 1, 2024. The National Assembly and the Senate must then debate and adopt the law, which must be promulgated on the following January 1. The document is a substantial text (416 pages for the 2024 version), which requires a lot of work at Bercy and which concerns all ministries.

The future Minister of Finance will not, however, be starting from scratch. The resigning government has worked on a provisional budget, taking the same as that of 2024 and including 10 billion euros of savings. He even sent ceiling letters on August 20, one month behind the usual schedule. Transmitted to the ministries, they determine the credit ceilings that will be available in the next budget.

Because the debates in the Assembly promise to be explosive

Once the government has prepared and submitted its draft finance bill, the text will be debated in the National Assembly and the Senate. This is a particularly complex task at the Palais Bourbon, since no political bloc has a majority of seats. Getting at least two-thirds of the deputies to agree will not be an easy task, given the conflicting views on France’s budgetary trajectory.

While the outgoing government is proposing 10 billion euros in savings, the New Popular Front (NFP) parliamentarians are instead proposing to increase state revenue by raising taxes for the richest. A proposal that is difficult to understand for the Macronist camp, which promised not to increase taxes during the legislative campaign.

The PLF could be adopted without debate thanks to Article 49.3 of the Constitution. The provision had been used several times in the fall of 2023 by former Prime Minister Elisabeth who had not found a majority to approve her budget. If the future government applied this strategy, it could in return find itself threatened by a motion of censure… which would at the same time cancel the text voted on.