Bruno Le Maire wants to curb public spending? that’s why

Bruno Le Maire wants to curb public spending?  that's why

Monday morning, the Minister of Economy, Bruno the Mayorput the “ola” and the handbrake on the public expensesin the midst of a debate on the state aid to be provided to the French during this period inflation. “Everything is not possible, simply because we have reached the alert level on public finances”, warned the tenant of Bercy.

The tap of public expenditure, which well watered the French for two years of coronavirusshould therefore dry up, despite still many aids: extended tariff shield, law purchasing power having to go to the Assembly, energy check… Enough to 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 rise in APL – out of a public deficit of 121 billion, nearly 50 billion higher than in 2019, a year of deficit “almost almost normal, 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 among the bad 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 a year to absorb his 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, interest rates rise. Now, who says debt, says borrowing money, says repayment. Reimbursement which 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 has not necessarily spent more than its neighbors during the covid period, but that it started from a much higher threshold”, observes Stéphanie Villers. The example of Greece has something to worry about, 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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