The French Court of Audit has issued a critical report on the state of public finances. Experts deem it crucial to reduce the deficit to 5 percent of GDP by 2026. After two years of significant deterioration in budgetary discipline, the institution warns that further failures could undermine investor confidence in France's public debt. According to the auditors, the potential for raising taxes has been exhausted, which necessitates deep cuts in public spending.

Necessity of radical savings

The Court indicates that the lack of structural reforms makes the 5% of GDP target uncertain, and the only path is deep cuts in public spending.

End of fiscal policy

Further tax increases have been deemed impossible; the French are already burdened with levies at a maximum level, which hampers the economy.

Market risk of debt

Failure to meet budgetary targets could cause panic in the markets and a drastic increase in the servicing costs of French debt.

The French Court of Audit (Cour des comptes) has published an alarming report highlighting the country's critical budgetary situation. According to the institution, France must absolutely achieve a deficit of 5% of GDP by 2026. This task is particularly difficult as previous years saw significant overshoots of forecasts. In 2023, the deficit was 5.5% of GDP, and in 2024 it rose to 5.8% of GDP. Although estimates for 2025 assume a drop to 5.4% of GDP, auditors describe these plans as highly uncertain. The main problem identified by experts under the leadership of the Court's current authorities is the lack of lasting structural reforms. The Court is sounding the alarm, emphasizing that the state's fiscal potential has been exhausted. This means the government can no longer rely on tax increases, which have reached a level stifling development in France. It therefore becomes necessary to shift the burden of fighting debt to decisive cuts in public spending, which will be politically costly for the administration led by Prime Minister Sebastien Lecornu. According to the EU's Stability and Growth Pact from 1997, eurozone countries should maintain a budget deficit below 3% of GDP. France has repeatedly struggled to adhere to this rigor, leading to excessive deficit procedures imposed by the European Commission. The institution also warns of a reaction from financial markets. Further failures in meeting budgetary targets could lead to an increase in debt servicing costs. Auditors estimate that to return to the EU deficit limit below 3% of GDP, France must implement savings of around 80 billion euros. The situation is complicated by personnel changes at the Court, where Amelie de Montchalin is set to take the helm, raising some controversy in the context of her previous role as Minister of Public Accounts. „Failure to respect the budgetary target would fuel market distrust of our public debt.” — Court of Audit 2023: 5.5, 2024: 5.8, 2025: 5.4, 2026: 5.0 80 billion € — savings needed to return below 3% of GDP

Mentioned People

  • Sebastien Lecornu — Prime Minister of France responsible for implementing the plan to reduce the budget deficit.
  • Amélie de Montchalin — Future head of the Court of Audit, former Minister of Public Accounts.