France: government’s debt reduction plan brings up fears of austerity issue

Following years of heavy expenditure, the French Economy Minister Bruno Le Maire unveiled the government’s 2023–2027 debt reduction goals, seeking to reduce them by four percentage points.

However, the French opposition cautions that this will bring a period of austerity across Europe, Euractiv reported.

The COVID-19 pandemic has ended, and France’s President Emmanuel Macron’s “whatever it takes” expenditure strategy is no longer in effect.

Le Maire asserted that he would be “firm” about “speeding up” debt reduction when he unveiled the “debt stability programme” for the years 2023–2027 on April 20. To combat the pandemic’s impacts, the government spent €240 billion, or around 10% of the nation’s GDP.

Following the outbreak of Russia’s war in Ukraine, the government then spent a total of €24 million on price-relieving measures for 2022.

At 5.2% in 2022, Le Maire told reporters, “We’ve had the lowest degree of inflation in the Eurozone in the past two years.”

Le Maire stated that he planned to “accelerate France’s debt reduction” to reduce the country’s debt by four percentage points by 2027, from 111.6% of GDP to 108.3%.

Deficit levels should also be reduced to 2.9% of GDP by 2027, or below the 3% cap outlined in the Growth and Stability Pact, the EU’s primary budgetary framework undergoing a thorough revision.

Le Maire stated that the necessity to restore “leeway” to be better equipped to handle any potential economic shocks justifies the expedited reduction.

This action is even more necessary because interest payments on debt are expanding; as a result of a series of interest rate increases by the European Central Bank, they are predicted to increase from their current level of €46.3 billion to €71.2 billion in 2027.

Le Maire stated that the State must do its part to reduce spending “at a time when we have just asked French people to make an effort by working longer.” As a result, it is anticipated that during the following four years, public spending will decrease from 57.5% of GDP to 53.5%.

According to a tweet from socialist MP Christine Pirès-Beaune, this might indicate that France is entering a new round of austerity measures.

The head of the Left group in the European Parliament and a radical leftist MEP named Manon Aubry warned that the government’s plan would mark the “start of austerity cuts” in the name of a “sacred” budget stabilization.

At a time of the inflationary crisis that hit households across Europe and of the pension reform that sparked anger in France, new austerity measures can deepen worries in French society.