On Monday morning, Bruno Le Maire and Gabriel Attal presented a finance bill that, according to their assurances, not only shields households from the sharp rise in inflation but also takes into account the imperative of stabilizing public finances. This bill was presented.
There was not much of a tense atmosphere. A defining moment will continue to be the presentation of France's budget for the year 2023. This past Monday morning, the Minister of the Economy, Bruno Le Maire, and the Delegate for Public Accounts, Gabriel Attal, unveiled the specifics of a financial bill that they are calling a “protection,” as the saying goes this time. This time last year, the executive was talking about a budget that was “in crisis.”
The two tenants of Bercy have therefore endeavored to show that they are taking full measure of the issue of inflation, which is linked to increases in energy costs and which weigh on the wallets of the French; but that they never forgot “the issue of public finances,” insisted the Minister of Economy, Finance, and Industrial and Digital Sovereignty Bruno Le Maire, presenting the text to journalists, just before doing so in the Council of Ministers. This was done just before the Ministers presented the text to the Council
On the one hand, therefore, Le Maire and Attal have confirmed that the increase in electricity and gas bills at the beginning of 2023 will be capped at 15% (instead of 120% if no action is taken); however, this is only one side of the story. In addition, 12 million lower-income households will be eligible to receive supplemental energy vouchers. An expenditure of 45 billion euros in gross terms for the state in the year 2023; this sum is reduced to 16 billion euros in net terms when we take into account what the state will recover from the electricity companies, who, in the words of the minister, “benefit from soaring prices and cannot benefit from rents.
The ministers expressed their satisfaction once more with their decision to index the income tax scale to inflation. By doing so, they were able to prevent an increase of 6.4 billion euros in additional taxes for households. In addition to this, the CVAE will be eliminated in two years, a decision that has been met with widespread opposition from businesses. The head of Bercy insisted that this should make it possible for businesses to relocate, adding that “It would still be a paradox if the country were the most attractive for foreign investors and not for French companies.”
The risk of rates increasing
On the other hand, the ministers reiterated their desire not to dig the hole any further in the coffers of the State, despite the challenging economic context – the forecast of 1% growth retained by Bercy for 2023 not being guaranteed elsewhere… etc. As a result, they guarantee that the public deficit will be successfully maintained at 5% of GDP in the following year, which is the same level as in 2022. After reaching 111.5% of GDP in 2022, the debt level would remain unchanged at 111.2% of GDP. Gabriel Attal emphasizes that protecting the French also means protecting our public accounts. “Protecting the French also means protecting our public accounts,”
Bruno Le Maire, who challenges those who doubt the government's desire to reduce public spending, says, “Growth, activity, and full employment: this line has always been ours, to fall below 3% public deficit in 2027.” This line has always been ours to fall below the 3% public deficit in 2027. We were able to get out of it no matter the cost, and we won't be going back there. I won't let anyone tell me that we took the easy way out or that we are not responsible for what happened “. Therefore, according to the promise made by the Minister of the Economy, any new expenditures will be financed down to the nearest euro.
Over the course of 2022-2023, Bercy forecasts a decline in expenditures in the volume of 2.6% (excluding the effects of inflation). And plans to reduce the weight of public spending over the course of the five-year period, bringing it down from 57.6% of GDP to 53.8%; this will be “an unprecedented effort for 20 years.” “According to the Minister of the Economy, “this firmness and this consistency are absolutely necessary when you have 10-year borrowing rates at 2.5%.”
Finally, Bruno Le Maire provided assurance that the reforms to which the executive branch had committed will be properly implemented. These reforms include the one regarding unemployment insurance, which is already on the right track, as well as the pension reform. It is entirely possible to carry out reform that is both fair and effective within a timeframe that is considered reasonable. And this is even more true now that the French people have given the President of the Republic their approval to carry out this reform. The Minister “does not exclude structural reforms to reduce spending either; for example, there can be better efficiency of spending on employment policy and housing.”
In the meantime, in order to meet the priorities outlined by Emmanuel Macron, an additional 10,000 civil servants will be hired the following year. These civil servants will be recruited in order to meet the priorities of Education, Security, and Justice. As Bruno Le Maire came to a conclusion, he stated that “this budget holds firm the economic line that has always been ours, valorization of work, the competitiveness of companies, protection of the French, and energy transition.”
In any event, the text that has been presented is a trial by fire, in a situation in which there is a relative majority in the National Assembly and while the executive is simultaneously presenting its social security financing bill (PLFSS), in which the contentious pension reform could be introduced by amendment. This is a context in which there is a relative majority in the National Assembly. For the time being, the government intends to focus its efforts on “the narrow way” negotiation with the oppositions, but they are not ruling out the possibility of using the 49-3 vote to compel the passage of the text.