Here is who should not do the business of the government on the eve of legislative elections, and while the National Rally and the Nupes have continued to denounce in recent weeks the inaction of the executive on purchasing power. This Tuesday, May 31, INSEE announced inflation at 5.2% for the month of May, its highest level in thirty-seven years. The institute also revised the final growth figure for the first quarter to -0.2%, against 0% initially forecast. In particular, the decline in household consumption, the traditional engine of growth tricolor, which fell by 1.5% in the first three months of the year.
Growing concerns
Even if these figures were expected overall, with inflation still largely driven by energy and food prices, they remain bad news for the government, which has made purchasing power one of the priorities of the five year term. According to INSEE, this fell by 1.9% in the first quarter, despite the various measures put in place since last summer to limit the effects of the rise in energy prices on the portfolio of French.
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Sign of the ambient tension, the Minister of the Economy Bruno Le Maire also improvised a press briefing on Monday May 30 when concerns, relayed by Marine Le Pen, were raised on the prospect of a catch-up of the freezing of the electricity prices on next year’s bills. “There will be no catch-up” on electricity bills, he hammered, without giving more details.
A long-awaited purchasing power law
Today, the catalog of measures expected to curb the effects of inflation is more or less known: the maintenance of the rebate on fuel and the tariff shield on gas and electricity until the end of 2022, the indexation of retirement pensions and social benefits on inflation, the unfreezing of the index point for civil servants, the reduction in contributions for the self-employed, or even the abolition of the audiovisual license fee.
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But in detail, the vagueness remains on the content of some of them, such as the food voucher, of which we still do not know the amount or the terms of application. In recent days, many associations have also called for the freezing of the rent index, indexed to inflation. A proposal coldly welcomed by Matignon, Élisabeth Borne considering that it risked harming small owners.
Narrow room for maneuver
“In addition to the political considerations aimed at not offending anyone during this election period, it must be understood that the calibration of aid is complicated, because if for the moment the tariff shield has made it possible to limit inflation in France compared to the rest of the euro zone, there is also a risk of fueling it by increasing demand or wages too aggressively », explains Sylvain Bersinger, economist at Asterès.
In addition, budgetary constraints have tightened in recent weeks, with the tightening of monetary policies by central banks. “More than interest rates, which remain negative once inflation is taken into account, the risk for the executive is above all that of no longer being able to count on the resumption of growth to reduce the deficit”, adds economist Xavier Jaravel, professor at the London School of Economics.
More targeted measures difficult to put in place…
In response to this budgetary problem, the government is trying to replace a generalized and expensive “whatever the cost” approach with measures that are more targeted to the vulnerable populations most affected by inflation. Before the presidential election, he announced the replacement at the end of July of the discount of 18 cents on the price of gasoline by a device aimed at large rollers, which today seems to be bogged down.
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“The problem with targeted measures is that they are unpopular, and difficult to implement effectively. For example, in terms of fuel, there are enormous inequalities in the face of rising prices within the same population category, between households living in rural areas or in towns. However, this is very poorly presented in the public debate”, emphasizes Xavier Jaravel.
For its part, the tariff shield on gas and electricity prices should continue to apply regardless of the level of consumer income. «This time the question is not only that of equality in the face of inflation, with wealthy households living in larger and therefore more energy-intensive housing, but also that of the incentive to consume less energy. », adds Xavier Jaravel. Preventing inflation from setting in, protecting the French from rising prices, while encouraging them to consume less… The new government’s puzzle has only just begun.