Emmanuel Macron chooses a protective and spendthrift 2023 budget in the face of the crisis

Posted Sep 25, 2022, 6:32 PMUpdated on Sep 25, 2022 at 7:03 PM

At the end of April, when his short presidential campaign was already coming to an end, Emmanuel Macron announced that the “liberate, protect” which had served as the economic standard for his first five-year term would be replaced by a “liberate, plan” for the second. Five months later, the first budget of his new mandate – unveiled on Monday – nevertheless gives another reading of the direction taken by the Head of State: in truth, it is the term set aside – “protect” – which emerges very clearly from this financial text which gives pride of place to expenditure in the face of inflation, and which assumes a still high deficit.

Five years later, the contrast is great between the two finance bills (PLF) which install the new legislature. In 2017, the government of the time multiplied the tax cuts – in particular on capital to strengthen the attractiveness of the country – and tightened the bolts to stay the course of a deficit at -3% of GDP.

This time, if the creed of the supply policy is reaffirmed, the only tax measure in its favor – the abolition of a production tax, the CVAE – was finally diluted over two years in an attempt to contain both the public balance to -5% of GDP next year, ie a simple stabilization compared to what is forecast for this year. “A deficit of -5% is not extremely ambitious, but if we manage to hold it, it will already be quite a lot,” admits a member of the majority.

Declining growth

Emmanuel Macron must, it is true, do with headwinds. Seven months after the start of the Russian aggression against Ukraine, all the economic indicators have turned very dark orange: Bercy has finally had to revise its growth forecasts for next year down from 1.4% to 1%. – a level still considered optimistic by many economists – while inflation could still expect 4.2% next year after 5.3% in 2022.

Faced with this, even if he denies any reference to “whatever the cost”, the Minister of the Economy, Bruno Le Maire, again took out the check book, like what do most of our neighbors in Europe. During the summer, it had been announced a tightening of the aid mechanisms in the face of soaring energy prices, but this proves to be very relative: the cost of the tariff shield on the prices of gas and electricity will jump to 45 billion euros, even as the virtual freeze will give way to a significant 15% price increase. To these gargantuan amounts are added new credits for priority projects of the executive, such as the school.

Revised ambitions

In the end, State expenditure should increase by 21.7 billion next year compared to 2022. In the JDD, Gabriel Attal, Minister Delegate for Public Accounts, promised to “reduce the weight of public expenditure by 57.6% to 53.8% of GDP” over the five-year term, but this promise is already less ambitious than that made during the summer in Brussels, a sign that the time is not yet in a pinch.

This trend can also be read through the small place left to savings. Admittedly, there is still the promise of a pension reform, but the timing remains uncertain and the effects will take time to be felt. For the rest, Gabriel Attal has set out a few rare avenues, in particular the reimbursement of work stoppages issued by teleconsultation when these are not issued by the attending physician. The Minister Delegate also wants to make progress on social and tax fraud (on VAT in particular).

These themes are barely disguised calls from the foot towards LR. If the members of the majority have no illusions that the adoption of the PLF by 49.3 seems likely, they intend to show until the end that the blockage will not come from them. This is the meaning of the “Bercy dialogues” which have been held in recent days, and which – in addition to the proposals on tax evasion – have also resulted in an adjustment of the “MaPrimeRenov” device requested on the left as on the right.

Electric debate

However, the government has for the moment addressed the most consensual aspect of the discussions with the oppositions. On the left, we want to relaunch the debate on the taxation of “superprofits”. And above all the fate reserved for local authorities – while Bercy wants to freeze their allocations – promises an electric debate, with strong pressure to increase spending a little more.

The executive therefore has a tight cap despite everything if he wants to slightly reduce the debt from 111.2% of GDP in 2023 to 111.5% in 2022, as he promised. This will not prevent some symbolic markers such as the passage of debt above the threshold of 3,000 billion euros, as acknowledged by Gabriel Attal, and a debt burden climbing to more than 50 billion to reach 51.7 billion next year.

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