France announces €10bn cut in public spending as growth outlook darkens

French Finance Minister Bruno Le Maire said the government had lowered its forecast for 2024 GDP growth to 1% from 1.4% as war in Ukraine and Gaza and a slowdown at top trading partners Germany and China darkened the outlook.

In an interview with French television TF1, he also said that state spending would be cut by €10 billion across all departments and agencies.

“It is a growth forecast that remains positive, but takes into account the new geopolitical context,” Le Maire said, citing the war in Ukraine and the Middle East, problems with maritime transport in the Red Sea, and the economic slowdown in China and Germany.

He added that there would be no tax increases and no cuts in social security payments to citizens, but stressed that all government ministries and agencies would contribute to the spending cuts.

“We will immediately cut, in the coming days, ten billion euros in state expenditures,” he said.

Le Maire said there would be €5 billion in operating expenses cuts for all ministries and another €5 billion in public policies, notably €1 billion in public aid for development, and €1 billion on residential building renovation subsidies.

Another €1 billion will be shaved off the budgets of state operators such as export agency Business France and the ANCT agency (Agence Nationale de la Ccohésion des Territoires) for regional government policies.

On track to keep deficit at 4.4% of GDP

Le Maire also said the government would make sure that France remained on track to respect its target of reducing the 2024 state deficit to 4.4% of GDP.

“We are keeping the option of implementing a supplementary budget in the summer, depending on economic circumstances and the political situation,” he said.

The government aims to gradually cut the fiscal shortfall in coming years until it falls below an EU ceiling of 3% in 2027.

The new government forecast is more in line with a series of recent growth outlook downgrades by the European Commission, the OECD and French statistics agency INSEE.

The European Commission on Feb. 15 cut its 2024 GDP growth forecast for France to 0.9% from the 1.2% seen in November, and it cut its forecast for Germany to 0.3% from 0.8%.

Earlier this month, the OECD cut its 2024 French growth forecast to 0.6% from 0.8% previously.

France’s statistics agency INSEE on Feb. 7 forecast quarter-on-quarter growth of just 0.2% in the first and second quarters.

The French economy grew 0.9% in 2023, compared with 2.5% in 2022 and a 6.4% post-Covid spurt in 2021.

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