France's state finances deteriorate as it misses target on cutting deficit

France's finance ministry will raise its deficit target for 2024 to the equivalent of between 5 percent and 5.1 of GDP on Wednesday, up from an original target of 4.4 percent due to a rapid deterioration of state finances, reported a leading French financial newspaper.

At the end of 2023, France's public deficit stood at €3 trillion, making it one of the most indebted countries in the EU

According to Les Echos daily, President Emmanuel Macron and Finance Minister Bruno Le Maire are at loggerheads over how to bring state finances back on track, with Le Maire arguing for stronger budget cuts and rejecting any increase in income tax.

The paper said the new target would require additional spending cuts worth €10 bn, on top of the €10 bn of spending cuts announced in February.

Paris is due to send a revised deficit reduction plan to Brussels in the next few days.

Credit ratings at risk

Les Echos, quoting unnamed government sources, said the government is considering a further freeze of government spending, a possible increase in the tax on energy companies' profits and the possibility of freezing some social security spending, notably on health insurance.

The paper reported that, officially, the objective of returning to below 3 percent in 2027 remains in place, even if most economists are sceptical.

Following decades of exploding the state spending budget, France is under pressure to show it will avoid a budget crunch that is putting itscredit ratings at risk.

Statistics agency INSEE said on 26 March the deficit ended 2023 at 5.5 percent of GDP, overshooting the 4.9 percent target.

For 2025, France is targeting a 4.1 percent deficit, revised up from an earlier target of 3.7 percent, Les Echos reported.

(with Reuters)