France’s public deficit shrank to a better-than-expected 2.6 percent of GDP last year, the first time it has fallen below the EU’s 3 percent limit in a decade, the National Institute of Statistics and Economic Studies (INSEE) said yesterday.
The result, better than the government’s 2.9 percent target, would be good news for French President Emmanuel Macron, who made respecting EU budget rules after years of delays a cornerstone of his aim to restore French fiscal credibility among EU peers.
Shortly after he was elected in May last year, Macron took belt-tightening measures, including cuts to a popular housing allowance, to make sure the budget deficit would not overshoot the 3 percent limit, costing him precious points in his popularity rating.
However, INSEE figures showed the better-than-expected improvement in France’s public finances was also in a large part due to stronger tax receipts, boosted by brisker economic growth.
The French tax burden rose to a record of 45.4 percent of GDP product last year from 44.6 percent in 2016.
Government spending rose 2.5 percent and government revenue 4 percent, INSEE said.
France was also one of only two eurozone countries still under the European Commission’s excessive-deficit procedure, with only Spain expected to have done worse last year, according to European Commission forecasts.
The improvement should give welcome support to Macron’s quest to convince Germany, the EU’s paymaster, to reform the eurozone and help overcome mistrust between northern European countries and what they perceive as profligate southern members.
However, on the domestic front, the better-than-expected deficit figures could represent a headache for the president.
Calls are growing within his party for some of the windfall, as it has come to be called, to be spent, not entirely used to pay down debt, as his government has promised.
French Minister of Finance Bruno Le Maire has dismissed such calls, saying France’s debt, which reached 97 percent of GDP last year, was unsustainable.
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