Why does Bruno Le Maire want to curb public spending?

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Why does Bruno Le Maire want to curb public spending?

Why does Bruno Le Maire want to curb public spending?

Why does Bruno Le Maire want to curb public spending?

The public expenditure tap, which has watered the French well for two years of coronavirus, should therefore dry up, despite still many aids: extended tariff shield, purchasing power law to pass to the Assembly, energy check… What give the minister even more cold sweat. So, should we really be worried about our public spending? We have concocted four very creepy graphics on the subject.

A deficit that cannot be resolved

Source: Court of Auditors, 2022.

The public deficit exploded in 2020 and 2021, with the coronavirus crisis and the “Whatever it takes” strategy. In 2022, the Court of Auditors expected in February – i.e. before the war in Ukraine, the rise in the price of energy, the tariff shield, aid for purchasing power, the increase in APL – on a public deficit of 121 billion, nearly 50 billion higher than 2019, a year of “almost normal” deficit, judge Stéphanie Villers, specialist in macro-economics. This forecast for 2022 is already wrong, she adds, and the deficit should be much higher with all the public spending that has been added. While the deficit has widened by 250 billion in two years, it should have been absorbed as quickly as possible, but the year 2022 is not on the way. »

France among the European countries with the largest debt

Source: Insee, 2021.

“France remains one of the poor students of the European Union, traditionally the countries of the South”, observes Stéphanie Villers in the first place. The whole question remains to know how long the countries of the North will respect the European budgetary rules by letting the frivolity of the countries of the South take over: “We cannot blow up the debt ad infinitum”, recalls the specialist. Currently, even if France gave all its wealth over one year to reduce its debt (we reassure you, it’s impossible), it would remain in debt. For Greece, it would take two years.

The explosion of debt in France

Source: Insee, 2022.

The years 2020, 2021 and 2022 show the explosion of debt with the coronavirus and “Whatever it takes”. “The public debt has increased by just under 500 billion euros. This is a huge sum that will have to be reabsorbed one day. However, with all the measures planned for 2022 against inflation, the debt is above all likely to continue to increase, ”notes Stéphanie Villers.

Second problem, and not the least: with inflation, it is interest rates that increase. Now, who says debt, says borrowing money, says repayment. A refund that is therefore more and more expensive. This is also the fear of Bruno Le Maire: “When inflation increases, the debt burden also increases by several billion euros, and my responsibility as Minister of Finance, I want everyone to hear it, is to return to balanced public finances by 2027,” he insisted. Recalling that France borrows “at more than 2%”, while interest rates were negative or zero a few months ago.

France, champion of public spending

Source: Insee, 2021.

Historically, France has had an extremely high share of public spending, much higher than the European average. “What we see is that France did not necessarily spend more than its neighbors during the covid period, but that it started from a much higher threshold”, notes Stéphanie Villers. The example of Greece is cause for concern, alarms the specialist: “The sharp drop in public spending in 2014 is explained by the budgetary constraints imposed by the European Union. This is what we risk when our public spending soars. And this is what France risks in the long term if it continues on this path. Hence the need, according to Bruno Le Maire, to say stop.

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