Slower economic growth means France must cut €10bn in public spending

French Finance Minister Bruno Le Maire has announced €10 billion of spending cuts across all government departments and agencies to make up for a drop in the 2024 GDP growth forecast to 1 percent, from 1.4 percent.

French Economy, Finance, Industry and Digital Security Minister, Bruno Le Maire, who has announced a lowering of France's GDP growth forecast for 2024. © Benoit Tessier/Reuters

"It is a growth forecast that remains positive, but takes into account the new geopolitical context," Le Maire said Sunday in an interview with TF1 television, citing the wars in Ukraine and Gaza and problems with sea transport in the Red Sea, along with a “marked economic slowdown” in China, and a “recession in 2023 in Germany”, both top trading partners.

The government’s revised growth forecast is in line with other estimates, with the Bank of France expecting 0.9 percent growth and the OECD earlier this month cutting its prediction to 0.6 percent, from 0.8 percent.

As a result, France will "immediately" need to cut €10 billion in state spending, Le Maire said, but it will not be done through tax increases or cuts in social security payments.

Cut down on ministry expense

He said five billion euros will be cut from the operating expenses of all ministries, and the other five will come from public policies, including one billion euros cut from public aid for development, and another one billion cut from renewable energy programmes.

Another billion will be cut from state the budgets of state operators such as export agency Business France and the regional government policy agency, ANCT.

Le Maire also said the government would respect its target of reducing the 2024 state deficit to 4.4 percent of GDP, and to gradually cut the fiscal shortfall until it falls below an EU ceiling of 3 percent in 2027.

(with Reuters)