The deterioration in France’s prospects is a major blow to Macron. Until now, he had set out to improve France’s fiscal position without austerity or tax hikes, instead relying on stronger economic growth that he said would come from pro-business and labor-market reforms.
Macron’s Bid to Revamp French Economy Falters as Growth Slows
, Bloomberg News
(Bloomberg) -- President Emmanuel Macron’s plan to revamp France’s long-term economic prospects and restore its deficit-ridden public finances is running into difficulties after the government cut the outlook for growth.
With Europe mired in an extended period of near-stagnation, Finance Minister Bruno Le Maire lowered the forecast for expansion this year to 1% from 1.4%. The weaker outlook also pushed him to announce €10 billion euros ($10.8 billion) of spending cuts to meet commitments to reduce the country’s budget deficit.
“The principle of responsibility is to act at the right moment with rigor but without brutality to keep control of our public finances, deficits and debts,” Le Maire said on Sunday in an interview with TF1 television to announce the measures.
Budget Minister Thomas Cazenave said on Monday that it’s “very probable” the government will have to save more than €12 billion next year.
The deterioration in France’s prospects is a major blow to Macron. Until now, he had set out to improve France’s fiscal position without austerity or tax hikes, instead relying on stronger economic growth that he said would come from pro-business and labor-market reforms.
“I am committed to not increasing taxes,” said Le Maire, who has been in his role since Macron was first elected in 2017. “We have cut them and won’t deviate from this line. French people can’t bear any more tax.”
Read more: France Lowers Its 2024 Economic Growth Forecast to 1%
Macron’s approach has already come under increased scrutiny after spending ballooned during the Covid-19 pandemic and again in the energy crisis sparked by the war in Ukraine. In December, S&P Global Ratings kept a negative outlook on France’s credit rating and cautioned it could downgrade at some point this year, depending on how government spending and economic performance affect public finances.
Asked if he was concerned about any potential lowering in upcoming ratings agency reviews, Cazenave told France 2 television: “We didn’t waste time when we saw that revenues were less than economic growth, which was slowing. I think this should convince our partners of the seriousness of our management of our public finances.”
Macron’s economic strategy is also under pressure after unemployment rose last year and companies in sectors from finance to construction prepare for more layoffs.
In September, France presented a first step toward tackling high debt with €16 billion of savings to reduce its deficit to 4.4% of economic output in 2024 from 4.9% last year. But most of that will come from withdrawing vast support provided to households and firms during the energy crisis, and the plan relied on stronger economic growth.
“It’s still positive growth but it takes into account the new geopolitical context,” Le Maire said. He cited the wars in Ukraine and the Middle East, a slowdown in China and recession in Germany as taking a toll on the French economy.
--With assistance from Nayla Razzouk.
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BERLIN-TO-PARIS MONEY HUSTLE: France Signs Security Pact with Ukraine, Pledges "Up to €3 Billion" in Additional Military Aid (Running time: 44:46)
FRANCE 24 provided live coverage of the press conference after the signing as well as analysis. . .
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Updated Feb. 16, 2024 3:49 pm ET
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France and Germany lined up long-term military-aid pacts with Ukraine on Friday, as the Biden administration struggles to push its own assistance through Congress and anxieties mount over Donald Trump’s skepticism toward trans-Atlantic security ties.
Ukrainian President Volodymyr Zelensky was shuttling between Germany and France Friday to sign the accords, which aim to make good on commitments the Group of Seven industrialized nations made last year to reassure Ukraine after the North Atlantic Treaty Organization declined to invite Ukraine to join the alliance.
France signs security pact with Ukraine, pledges 'up to €3 billion' in additional military aid
The agreement includes a French aid pledge for up to €3 billion for 2024, after €1.7 billion in 2022 and €2.1 billion last year.
- Both deals are part of Zelensky's drive to shore up help for his forces who are struggling to hold off Russian attacks on the frontline city of Avdiivka.
- The French presidency said ahead of the meeting that the pact would run for 10 years, and include precise commitments from the French side, including financial pledges.
The deal is also to help pave the way towards Ukraine's future integration into the European Union and NATO, officials said.
"Our security agreement is a truly unprecedented bilateral document," said Zelensky.
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