French public auditor urges in-depth post-crisis spending review
France will need to carry out an unprecedented spending review once the coronavirus crisis subsides as part of a new fiscal strategy needed to avoid a dangerous debt spiral, the independent public audit office said on Tuesday.
The French government expects the public sector budget deficit to blow out to 11.4% of economic output this year as the euro zone’s second-biggest economy contracts by 11%, both unparalleled in modern peace-time France.
With public debt set to hit 121% of gross domestic product this year, the Cour des Comptes auditor said even if the economy bounced back next year the debt burden would not return to pre-crisis levels over the next decade.
Finance Minister Bruno Le Maire has said the government counts on the return of growth to keep debt under control and has not only ruled out tax increases but even wants to cut some levies on companies later this year.
However, the auditor said growth alone would not be sufficient to reduce debt and said France needed to etch into law medium-term plans and stick to them over time, something that previous governments have struggled to do.
“A deep review of our public policies is necessary to bring about such an improvement, which is necessary to keep the public finances under control and also desirable for creating favourable conditions for growth,” the auditor said in an annual outlook for the public finances.
The government needs to better prioritise spending with more rigorous reviews of where public funds are going than in the past, it said.
Even before the pandemic, France had the highest public spending among industrialised countries, at nearly 56% of GDP in 2018, the last year for which comparable data is available from the Organisation for Economic Cooperation and Development.
Source: Reuters (Reporting by Leigh Thomas; Editing by Gareth Jones)