A report submitted to the government warns of the need for a massive budgetary effort to avoid a debt crisis by 2032.
A report on the trend situation in public finances, commissioned by Bercy at the end of May from four economists – Xavier Jaravel, Xavier Ragot, Jean-Luc Tavernier and Natacha Valla – and made public on Wednesday July 15, puts the scale of the minimum budgetary effort to be made between now and 2032 at 126 billion euros, simply to stabilize the public debt and avoid a financial crisis. This amount represents around 25 billion euros per year, and highlights the worrying dynamics of French public finances.
A worsening deficit trajectory without corrective measures
The four economists looked at the natural progression of public spending, that is to say their evolution “with unchanged policy”. It appears that these expenditures are increasing much faster than economic growth, thus widening the deficit, while revenues remain relatively stable in the absence of new measures.
According to the report, the public deficit would reach 5.9% of GDP by 2027 in the absence of corrective measures, almost a point more than the target of 5% set for 2026 and already in doubt due to the war in the Middle East. It would continue to deteriorate to reach 6.8% of GDP in 2030.
The main reason for the surge in spending is the increase in interest paid to holders of French bonds. This debt burden will increase by around ten billion euros each year, “under the effect of the progressive refinancing, at higher rates, of maturing bonds”. It should mobilize 78 billion euros this year, then increase by 46 billion by 2030 to reach 124 billion – a rate almost five times faster than the potential growth of French economic activity.
Other very dynamic expenditure items contribute to the natural drift of the deficit. Military spending, for which Parliament has just approved a further increase, must increase by 20 billion euros by 2030 (+34%, or three times faster than growth). France’s contribution to the European Union budget must also increase significantly in the years to come, under the new budgetary framework agreed with the other member countries (+10 billion by 2030, an increase of 37%).
Social spending is also experiencing marked growth. Health spending is increasing by around 10 billion euros per year (+40 billion by 2030, or +15%), due to the aging of the population, the increase in long-term conditions and the cost of new therapies. Retirement pensions cost an additional 11 to 12 billion euros each year (+47 billion by 2030, or +13%), due to the increase in the number of retirees and the average amount of pensions.
A diagnosis deemed “very worrying”
The authors of the report do not hesitate to warn of the seriousness of the situation. “In a context of rising interest rates, the situation of our public finances is no longer sustainable,” write the economists. “The diagnosis is very worrying, judges Xavier Ragot, the president of the OFCE. The interest of this report is to have something clear, documented and precise – so that it is integrated upstream.”
The report distinguishes two time horizons: the development of the 2027 budget next fall and the presidential campaign. “The cost of inaction in 2027 is crippling,” the report warns. If the government and elected officials fail to provide the country with a budget, the deficit will plunge by almost one point of GDP, due to the debt burden, the increase in the Army budget, the dynamism of pension and health spending, and the non-renewal of the surtax on the profits of large companies. To simply stay at 5% of GDP, other expenditure would have to be reduced (or revenue increased) by around 20 billion euros.
“In 2027, if we arrive at a deficit of 4.9% of GDP, that will already be very good. It will not be standing still,” underlines Xavier Ragot.
Economists are careful not to recommend specific policy measures, but insist on the need for a shared effort. “It is illusory to think that a minority part of the population (the ultra-rich, civil servants, retirees, foreigners, etc.) can undergo the entire adjustment,” they specify. Given the scale of the effort, everyone should be involved and all levers mobilized (expense savings, increased revenue and boosting growth).
The room for maneuver to increase taxes is “reduced”, however, underlines the report, it is therefore “a priority to question the amount and efficiency of public spending”, in particular social spending. Thus, “in the short term, a deindexation as part of a “blank year” should not a priori be excluded in 2027”.
“This should still be a major aspect of the 2027 presidential campaign, estimates Xavier Jaravel, deputy president of the Economic Analysis Council. Do the candidates want to stabilize the debt, which seems to be the minimum ambition to set? And how do they plan to achieve this?”
