The French government is facing a major budget squeeze as it plans to implement a €60 billion belt-tightening drive in the coming year. This move is aimed at reducing the deficit to 5 percent of GDP from an estimated more than 6 percent this year. The plan involves two-thirds of the budget cuts coming from spending reductions, with the remaining portion coming from new taxes.
The question arises as to how France found itself in this fiscal hole in the first place. One of the main reasons for the high deficit is the economic impact of the Covid-19 pandemic, which has led to a decrease in revenue and an increase in spending to support the economy. Additionally, the country has been grappling with long-standing structural issues such as high public spending and a complex tax system.
The new budget plan is expected to have a significant impact on the country’s economy. With spending cuts and tax increases, there may be a reduction in government services and programs, which could have a negative effect on certain sectors and individuals. However, the move is seen as necessary to stabilize the economy and reduce the deficit in the long term.
To gain more insight into this issue, FRANCE 24’s Charles Pellegrin speaks to OFCE Economist François Geerolf. Their discussion sheds light on the challenges facing France and the potential implications of the budget squeeze on the country’s economic outlook.
Watch the video by FRANCE 24 English
Video “Budget squeeze: Digging France out of its fiscal hole • FRANCE 24 English” was uploaded on 10/04/2024 to Youtube Channel FRANCE 24 English