France's public finances are reason for concern, its court of auditors warned on Monday, cautioning that the government's pledge to rein in the deficit by 2027 was unrealistic.
Tax cuts, inflation, lingering fallout from the Covid crisis and major new expenses including the 2024 Olympics mean that, on its current trajectory, France looks unlikely to bring its deficit below 3 percent within three years.
That's according to the Court of Accounts, the body responsible for auditing the use of public funds in France.
In its latest assessment of France's finances, the court warned that 2023 was "a very bad year" and was followed by a number of emerging risks in 2024, including widespread farmers' protests, unrest in New Caledonia and the cost of organising the Paris Games.
The government's goals to save billions of euros and bring the deficit below 3 percent by 2027, as required by EU rules, are "unrealistic targets" based on overly optimistic growth forecasts and unprecedented savings on public spending, the auditors said.
Its own calculations show that "any deviation from the growth, expenditure or revenue forecasts would be enough to derail the trajectory and miss the deficit and debt targets for 2027".
Climate costs underestimated
Yet the current forecasts fail to properly account for significant medium-term risks, the court said – notably the effects of climate change.
Climate-related risks and the transition to renewable energies will inevitably weigh on growth, investment and tax revenues, the auditors warned.
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The court called for more ambitious efforts to reduce France's deficit and rein in national debt.
Its warning comes as France struggles to form a new government after snap elections resulted in a hung parliament.
A left-wing alliance, the New Popular Front, gained the most seats but falls short of a majority. If it manages to rule by minority or in coalition, some investors are nervous its economic plans – which include reversing pension reforms and increasing the minimum wage – could further increase deficits.
France targeted in EU crackdown on excessive spending
France's budget deficit was 5.5 percent of GDP last year – the second-highest in the Eurozone after Italy – while public debt is projected to reach 114 percent by 2025.
Both are well above EU limits, and Brussels has opened disciplinary proceedings against France for flouting its budget rules.
"Reducing our debt is a pressing obligation," Pierre Moscovici, president of the Court of Accounts, told business newspaper Les Echos.
"It's not a matter of left or right: it's in the general interest."
