“The good news is that France has so far remained in control of its own destiny,” Council members Adrien Auclert, Thomas Philippon and Xavier Ragot wrote. “Our debt is the direct consequence of our budgetary choices. It is not the mechanical accumulation of a snowball thrown down a steep hill” as opposed to Italy, where public debt continues to grow because of rising interest rates despite spending cuts.
The note recommends reducing the primary deficit — the difference between how much a government brings in and how much it spends minus interest payments — by 4 percent of the country’s GDP over the next seven to 12 years.
Cutting it faster would undermine growth, while cutting more slowly would result in spending too much on paying the debt back, they said.
Whether those recommendations will be heeded remains to be seen. Uncertainty looms over who will govern France and have to deal with the country’s financial troubles.
The left-wing New Popular Front, which came in first in snap elections this summer, has proposed expensive social measures, including torpedoing Macron’s controversial pensions reform, which raised the legal age of retirement to 64 from 62 for most workers.
France’s far-right National Rally this week signaled it’s ready to support the far-left France Unbowed in its bid to repeal the reform.
Together with six other countries, France is already facing the EU’s excessive deficit procedure for breaching public spending rules. Outgoing Finance Minister Bruno Le Maire already promised Brussels to bring France’s deficit down to 3 percent of its GDP and meet EU deficit rules by 2027.
Last week, France’s Court of Auditors slammed the government’s economic track record, saying it had failed to cut spending effectively and that its debt-reduction promises for the future were “unrealistic.”
