The number catches the eye. The size of the French budget deficit (excluding social security and local authorities) expected in 2021 should reach “about 220 billion euros”. Public Accounts Minister Olivier DeSoubet chose this sunny Saturday morning to announce the bad news.
The general situation worsened by nearly 47 billion euros, more than planned for this year (173.3 billion). “It’s an estimate, at this point,” Percy insists. It shatters all records. The state deficit had already doubled in 2020, reaching 178.2 billion euros. “The highest in our contemporary history,” said Minister of Economy, Bruno Le Maire, last January, during a hearing at the National Assembly.
New Business Support Systems were introduced in June
“This is the result of the support measures that we continue to take to best support the recovery,” pleads Minister Dusupt. It is clear that the recent imprisonment – which had no name -, with its consequences for economic sectors that are still in slow motion or stopped, such as hotels and restaurants in particular. The country has decided to allocate 15.5 billion euros in additional emergency measures. The sums “will be used specifically to finance micro-activity and aid directed to companies in difficulty,” Olivier Douceft and Bruno Le Maire explained last week.
To this, Percy added, “We must add 7.2 billion euros in advance of the emergency measures.” New aid measures for companies in difficulty or corporate tax exemption should also be introduced on June 2 on the occasion of the introduction of the revised Finance Bill (PLFR).
Growth slowed in the first quarter
But the Covid-19 release bill for the second year and “whatever it takes”, President Macron’s doctrine of the crisis to protect the economy, does not explain everything. The other blow to the state accounts is growth. It was phased out in the first quarter in France. Percy was counting on an increase in GDP of 0.4% as per the first assessment. Patatras, the restart of the economic engine is finally derailed, with GDP falling by an amount 0.1% according to INSEE, particularly impacted by a much less dynamic construction sector than expected. “The result is more spending and less income in the state coffers,” notes the Ministry of Public Accounts.
Was the government wrong, in its overzealousness, by announcing ten days ago a “remarkable recovery in growth” this year? This is what OFCE economist Eric Heier thinks, who on the contrary predicts a “very strong recession” in 2021. The government remains on track, optimistic. It is dependent on a strong acceleration in activity in the second half of the year, and maintains its 5% growth target for 2021.
“We will have to eliminate any costs.”
Who will pay off this huge debt? The question regularly returns to the anxiety of the French, without getting a clear answer. The government asserts that the new spending will be financed through the loan. “France is strong in the markets, we have shown that we are good managers,” confirmed Olivier Dussubet’s services. However, interest rates rose for two weeks, which should add to the bill. “We’ll have to get out of Whatever the costWe’re going to gradually remove the aid, “we’re still at Percy.
What other levers does the CEO next plan to activate? Take off taxes, as the government has promised, you will not increase. Bruno Lemerre, the economy minister who anxiously watches debt rises, puts into account a trilogy: “Strong growth, control of public spending over five years, and the pursuit of structural reforms, such as those on unemployment insurance, but as well as pensions when the time is right. The unemployment insurance system – scheduled for July 1 – is now in the hands of the State Council, which has considered appeals by seven unions.As for the pension reform that was suspended in March 2020, will it be re-launched in 2021 or will it appear in the election program Presidential 2022? Must be decided by Emmanuel Macron.
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