The government confirms aiming for a 3% deficit in 2015
The Minister of Finance has presented to the Assembly the stability program which is now to be examined by the European Commission. The forecasts seem very optimistic beyond 2015.
The objective is the 3% public deficit in 2015. The vehicle is the 50 billion euros in savings detailed last week by Manuel Valls. And the magic ingredient, the dose of usual optimism of the government’s economic forecasts. Finance Minister Michel Sapin presented on Wednesday in the Council of Ministers the stability program for 2014-2017, a three-year forecast that the eurozone states must deliver annually to Brussels. The document, which provides for a return of growth, ensures that France will respect its European budget commitments next year. Without raising taxes, but at the cost of a severe cure for rigor.
Growth: promised, it’s the upturn
The government expects growth of 1% this year, 1.7% in 2015, and 2.25% in 2016 and 2017. If these assumptions are verified, they would show a real restart, growth in 2013 being than 0.3%. With the levels forecast for the end of the five-year period, the economy would return to its pre-crisis growth rate (2.3% in 2007). And unemployment could decline, with the 1.5% threshold generally being the minimum for job creation. According to Michel Sapin, the recovery of activity will rest on a recovery of exports, but also on the economic policy of the government, including tax and social relief. However, it risks suffering from the “too high” level of the euro currently, the minister said.
Are these projections realistic? Previous government forecasts in this area have been strongly denied. The amending finance law of July 2012 provided for a growth of 0.3% for the year: it was nil. The 2013 budget was based on an optimistic 0.8%: it was 0.3%. Since 2013, a High Council of Public Finance has been responsible for assessing the credibility of the government’s economic forecasts. It found that the growth forecast for 2014 (1%) was “realistic” and that of 2015 (1.7%) was not “out of reach”, although it involves ” virtuous sequence of all the favorable hypotheses “.
The High Council however considered that the scenario expected for the following years was “optimistic”. According to the institution, the consequences of fiscal tightening could be more severe than expected: “There is a risk that the positive effects on employment and wages of the supply-side policy will not mitigate the negative effects. on the activity of budgetary consolidation”, the institution believes.
Deficit: the 3% is for 2015
Twice already, the European Commission has granted France additional time to go back below the 3% public deficit (including the state, communities and Social Security). This time will be the right one, promises the government, which plans to reach this level next year. Again, however, previous predictions were far from reality:
To reach 3% by next year, the government will save nearly 30 billion euros in 2014 and 2015. An objective to which will contribute the famous 50 billion euros in savings detailed by Manuel Valls last week, and confirmed this Wednesday by Michel Sapin. This plan is for 21 billion social protection, 18 billion the state and 11 billion local authorities. In particular, it should include a freeze on most social benefits and the civil servant index point. The first tranche of these savings, amounting to 4 billion euros, will be recorded in June in a collective budget. However, no tax increase will occur within three years, promised the minister. On the contrary, the tax rate should increase from 45.9% in 2014 to 45.3% in 2017, with tax cuts and social contributions.
Nevertheless, this drastic project is provoking protests among Socialist deputies, some demanding that it be revised down, others that the burden of the effort rests more on the companies. In an interview to Le Monde, however, Michel Sapin seemed to close the door to such developments, explaining that “there is one thing that will not be changed by the government: the major balances and the desire to restore competitiveness to businesses ” In the process, Socialist deputies, such as Laurent Baumel, announced that they would not vote the stability program next Tuesday.
M.Sapin’s hearing.No serious inflection of the budget pol.The defeat of the municipal was not useful.This time I do not vote #directAN
Debt: towards the recession?
This austerity cure aims to reduce the weight of debt, which has never been so important. According to government projections, the debt-to-GDP ratio is expected to peak in 2014 and 2015 at 95.6 percent, before declining to 91.9 percent in 2017. the debt, amounting to 46.7 billion euros in 2013, is the first item of expenditure of the State, before the budget of the National Education.