Budget 2025: Michel Barnier faces his first challenge
Michel Barnier, the new French Prime Minister, faces a daunting task: presenting a budget for 2025 without falling under a motion of censure in the National Assembly. With the budgetary situation already critical, Barnier must make rapid decisions so that the final copy of the draft finance bill is submitted to the High Council of Public Finances before September 13.
Last Thursday, Bruno Le Maire, Minister of the Economy, and Thomas Cazenave, Minister of the Budget, gave Barnier a letter detailing the issues of the 2025 budget. Jérôme Fournel, former chief of staff of Bruno Le Maire and now in post at Matignon, has a perfect command of these data.
Budgetary targets already obsolete
The targets set for 2024 have already been exceeded. While the former government was aiming for a deficit of 5,1% for 2024, it should ultimately reach 5,6%. This gap calls into question the budgetary trajectory, initially planned to reduce the deficit to 4,1% in 2025. In this context, the ambition to reduce the deficit below the 3% mark by the end of Emmanuel Macron's second term now seems unattainable.
Internally, experts estimate that a deficit of around 5,3% for 2024 would be a "performance". For 2025, the objective is to go below the 5% mark, a major challenge for Barnier.
Spending frozen, but not entirely cancelled
For 2024, Bruno Le Maire and Thomas Cazenave have frozen 16,5 billion euros of credits in order to limit spending. However, a large part of these funds could be unfrozen due to their essential nature, particularly for personnel expenses and social benefits. According to François Ecalle, a public finance specialist, around half of the frozen credits are generally reinstated at the end of the year.
One of the avenues being considered to ease finances is a retroactive measure to 2024 aimed at taxing the "exceptional rents" of electricity producers, through the Contribution sur la Rente InfraMarginale (CRIM). This tax, created in 2023, could bring in around 2,5 billion euros.
A 2025 budget under high tension
For 2025, Gabriel Attal, Minister of Education and former Minister of Public Accounts, has planned an envelope without an increase in credits for the ministries. This implies a budgetary effort estimated at 15 billion euros, to which are added 5 billion in additional savings on the Social Security budget. If Barnier wishes to strengthen certain budget items, he will have to compensate for these increases with new savings, either within Social Security or via new tax measures.
The presentation of the Finance Bill (PLF) before Parliament is scheduled for the first Tuesday of October, in accordance with the organic law on finance laws. The members of the Senate Finance Committee have already warned that no postponement would be tolerated.
Additional time requested from the European Union
On the European level, France has requested a postponement for the presentation of its public finance recovery plan, initially expected for September 20. Michel Barnier hopes to obtain an extension from the European Commission in order to spread the deficit reduction effort over a longer period, possibly up to seven years.
With a public deficit reaching 5,5% of GDP in 2023 and a national debt at 110,6% of GDP, France is under surveillance from Brussels. If no significant adjustment measures are taken, the debt could rise to 113,8% of GDP by 2025, well above the European threshold of 60%.
Michel Barnier therefore has a delicate and urgent mission ahead of him: reconciling budgetary rigour, economic recovery and political pressure, all under the watchful eye of the European Union.
