Macron’s stuttering reforms harm progress on deficit reduction

26 Feb 20

French president Emmanuel Macron’s deficit reduction plans have faltered due to deviations from his planned programme of cuts, according to the country’s national audit office.

 

Macron’s government has reduced taxes more than spending in the face of social pressure from such movements as the ‘yellow vests’ and the ongoing pensions strikes, the Cour des Comptes said in its annual report.

“The government has made the choice, in response to the social movements that started in the autumn of 2018, to significantly intensify the cuts in compulsory taxes for households,” the report said.

“However, it has not increased its effort to control spending.”

According to the latest official data, the public deficit was 3.1% of GDP in 2019, compared to 2.5% the year before.

Although a 0.8 percentage point increase caused by a one-off tax credit scheme was largely to blame, the resulting reduction in the structural deficit (which is a more long-term measure) was still low, the watchdog said.

“Despite growth slightly above potential growth for several years, the improvement in public accounts remains very gradual.

“France’s room for manoeuvre in the event of a cyclical downturn remains limited, and much lower than that of some of our partners, notably Germany,” the report reads.

Macron, upon his election in 2017, inherited a public deficit of 3.4% of GDP from the year before. He had hoped to reduce it by 2 percentage points within five years, with a programme of promised cuts to areas such as healthcare, pensions and the civil service.

But with the government predicting this year to reduce it to 2.2% of GDP, those initial hopes appear optimistic.

Responding to the report, the Ministry of Finance said it will present an updated plan next spring that it hopes will create a “durable recovery” of public finances.

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