Bruno Le Maire announces 20 billion euros in budget savings. Is it enough? The Minister of Finance also talks about the return of a "social VAT"... Gabriel Attal speaks of "rigor" for public finances!

The government's position, stated by the Minister of Economy and Finance, seems simple. Let's summarize it: less economic growth, thus lower tax revenues, hence the need for budget savings. This apparent simplicity is misleading and plays on the gullibility of the French public. In fact, it all starts with an overestimation of growth by the minister. He dreamt of 1.4% while the consensus among economists was around 0.9%, and the High Council of Public Finances labeled the growth forecast retained in the budget as "optimistic." This 2024 Finance Bill now raises a question of sincerity in its preparation.

With a reckless and intellectually immodest starting assumption, the result is inevitably disappointing. For my part, following the forecasts of the OECD and the IMF, I observe that the rate retained by Bercy, at 1%, is very uncertain. Our Eurozone partners are going through a mediocre economic situation, starting with Germany, which is indeed in recession. A growth rate close to 0.5% is not an absurd prediction. INSEE has just published the figure for the last quarter of 2023: +0.1%, which puts us on the brink of recession. Revenues, especially from corporate tax and VAT, are down by nearly 8 billion euros. Using simplified arithmetic, Minister Le Maire has therefore announced a freeze on budgetary credits amounting to 10 billion euros. Surprisingly – and as expected – he erased, during his interview on TF1, the acknowledged extent of the deficit, which amounts to -173 billion, nearly twice the volume of tax revenues from income tax.

It is safe to say, with serenity but compunction, that the initial announcements of 10 billion in savings were a mere drop in the bucket when compared to the magnitude of our deficit. For my part, between geopolitical uncertainties and the propensity for spending in our public sphere, I consider that we risk facing an additional tranche of 20 billion in budget deficit.

The deficit of the social security system would reach 11.2 billion euros this year and exceed 17 billion in 2027... Our debt service is exploding. Can we avoid a downgrade of our financial rating by rating agencies next April?

The French are suffering, and this is reflected through various parameters: increased consumption of anxiolytics, rise in sick leave, multiplication of post-Covid prescriptions. Thus, health insurance expenditures are growing while the slowdown in economic activity will dry up a portion of the financing of the social budget. Again, the last voted Social Security Financing Bill will be partly obsolete. If we follow the trend, by 2027, our country will be close to 20 billion in social deficit.

For the debt service, the question deserves calm but serious reflection. Indebted to the tune of 3.1 trillion euros by the end of 2024 (if we take the loyal care to consolidate the debt by integrating the execution deficit of the Finance Bill), France will approach 45 billion euros in interest payments or debt service.

Debt service will become the state's largest budget... Alarming!

Bercy published, three months ago, a forecast document indicating that in 2027, the debt service would be the largest national budget item, amounting to 70 billion euros. Due to a lack of rigor for decades, we will face a severe austerity cure (extreme rigor) which I doubt the social body will be able to accept the required effort. This is probably an element of reflection for the rating agencies, which, for now, are content to note that the French tax potential is substantial and that tax collection is efficient. In other words, our objective situation (the major aggregates and debt) is not good, but the "sheep" accept the tax pressure. Let's remember the increase in the CSG (Generalized Social Contribution) on retirees.

continue to trust us because private savings excluding real estate represent a pool of 6.850 trillion euros and play – albeit reluctantly – a role of guarantee. The government is not managing as a prudent head of a household and, in fact, shifts the quality of its management onto a debt that individuals and their descendants will have to honor, in part. For a deeper insight, one should read the esteemed Jacques de Larosière.

As proof that we have been living beyond our means for too long, Bercy seems to want to tackle the cost of our social model... There are many avenues, from reducing unemployment benefits to linking health care reimbursements to income levels... What do you think?

Not good! In reality, France is governed by minds nourished by a poor assimilation of the teachings of John Maynard Keynes and by a creeping socialism reminiscent of Swedish practices in the 1980s. It revels in solutions where the "sharp tip of the top" (i.e., the highest income deciles) pays and pays again, disregarding property rights. Look at the idea of "virtual rents" which involves taxing a portion of your main residence (France Stratégie, J Pisani-Ferry) or the possible abandonment of the exemption from capital gains for the main residence. Clearly, the reordering of public finances will trigger a big bang that will demotivate many taxpayers.

How do you assess the political risk of reforming a social model that is, admittedly, financially exhausted but, in a context of inflation, reduces the purchasing power of many households?

 I once believed in the reforming capacity of the current Executive. Seeing the results, I admit my mistake. Now, I await the future and an audit of France worthy of the one carried out by François Bloch-Lainé in 1981. The truth of public financial flows must be revealed beyond the messages of poor political communication.

Our public finances are particularly degraded: where do the responsibilities lie? Can we imagine that France would default on its public debt?

The evaporation of the strong growth of the Glorious Thirty has generated an annual deficit that, ultimately, impoverishes us.

France will not default on its debt (private savings as a guarantee and the ability to vote, as in 1983, a mandatory loan) but if the wall of bankruptcy excites some minds, I consider that we risk insolvency, which requires a reminder of its private legal definition: it is Article 1613 of the Civil Code, in force since March 21, 1804 (created by the Law of March 6, 1804, promulgated on March 16, 1804).

The seller will not be obliged to deliver, even if he has granted a delay for payment, if, since the sale, the buyer has gone bankrupt or into insolvency, so that the seller is in imminent danger of losing the price; unless the buyer provides a guarantee to pay at the end of the term. Civil lawyers know how to write (unchanged since 1804!) and the concept of insolvency is not the bankruptcy from which the State is supposed to be protected. However, it raises the question of providing "a guarantee to pay at the end of the term"... As for parents who sometimes pay the guarantee for their children's rental.