It’s been a week as France no longer has a government. Emmanuel Macron promises a new Prime Minister in the next few hours. He will also have a lot of work to do, with developing a budget for 2025 at the top of the list. Decryption.
Emmanuel Macron he explained it during his televised speech on 5 december 2024: does not include the France without a budget for 2025. The President of the Republic actually hopes, pending the presentation of a real budget, that next year’s budget will be the same as this year’s for the time being. This is thanks to a special law wich will also be presented to the Council of ministers this Wednesday.
Actually, all credits are renewed in the same way: they are frozen and renewed. With this result which was unexpected to say the least, given that in the budget proposed by the previous government these expenses should have increased by 3% due to inflation and growth. Paradoxically, since these credits are at the same level as this year’s, they will allow savings of between 15 and 18 billion euros according to the OFC, the French Observatory of the economic situation.
But freezing spending also means freezing income. It’s the same mechanism: income tax will not be indexed to inflation, so more families will be subject to this tax. Cash flow is estimated at 3 billion euros. but it will still be compensated by the indexation of pensions to inflation, specified yesterday.
Unfavorable economic climate
But in reality it is the uncertainty that remains, or at least, the wait. And this is never good in economics as ther is a risk in the medium and long term. This wait and uncertainty could cost 0.2 points of GDP for 2025, lowering the growth forecast to 0.8%. Faced with this situation, companies that do not feel reassured will invest less and therefore hire less.
The impact is concrete on the daily lives of the French. Faced with this uncertainty, they will put money aside. Saving to face arduous times, if by chance the future turns out to be difficult, is a fully natural reflex. and whoever says more savings says less consumption. However, household consumption is the heart of a country’s growth. It is indeed thus French growth that could be affected by this political uncertainty!
France – EU relationship
France,like the EU member states,must maintain its commitments to the Commission. But for the moment it is not necessary to limit the deficit to 3% of GDP, which today is 6.1%. As an inevitable result, France is subject to an excessive deficit procedure. If he fails to meet his commitments,he risks a fine which,in all reasonableness,could increase his debt by one and a half billion euros every six months.
All this generates fears.They concern,for example the farmers. In the absence of a government,they will once again have to wait for new measures against them. The censorship of the previous government made the planned aid and adjustments disappear. Same situation for the construction and public works sector which has relied on the promise of zero-interest loan extensions. But with the fall of the government the horizon darkened again.