France ‘dangerously exposed’ in case of economic shock, national audit office says
2024.07.15 04:37
By Sudip Kar-Gupta
PARIS (Reuters) – France’s public finances and its rising deficit are worrying and leave the country “dangerously exposed” in the event of a new, macroeconomic shock, the national public audit office said on Monday.
The audit office, known as the Cour des Comptes, reiterated it was vital for France, the euro zone’s second biggest economy, to reduce its public deficit.
“Due to delays in making real structural reforms, the cost of public debt, which has been exacerbated by recurring deficits and the weight of these deficits, has become more and more expensive,” it said.
This “has hampered other spending, hinders the ability to make investments and leaves the country dangerously exposed in case of a new macroeconomic shock,” it added.
It said France’s public financing programmes did not adequately take into account costs linked to policies aimed at protecting the environment, such as using more renewable energy.
Last month, the European Commission said France and six other countries should be disciplined for running budget deficits in excess of EU limits, with deadlines for reducing the gaps to be set in November.
France had a budget gap of 5.5% of gross domestic product (GDP) in 2023, up from 4.8% in 2022 and above the EU’s deficit limit of 3%.
French public debt was 110.6% of GDP in 2023. The EU Commission expects this to increase to 112.4% this year and to 113.8% in 2025 while the EU limit is 60%.
President Emmanuel Macron’s government has pledged to meet the EU’s deficit limit of 3% by 2027, but the outlook has been complicated by this month’s parliamentary election which resulted in a hung parliament.
Credit rating agencies Moody’s (NYSE:) and S&P Global have warned of negative impacts on the French economy from the political deadlock, where no political party won an outright majority.
