France Rejects Austerity With Gradual Repair of Public Finances

(Bloomberg) -- France will only gradually repair the damage to its public finances from the pandemic, avoiding austerity measures that would hurt economic growth, according to a long-term fiscal plan published late Thursday.

The budget deficit won’t fall below 3% of gross domestic product until 2027, the finance ministry said. While progress could have been faster, targeting a drop below 3% in 2025, that would have involved major spending cuts and tax increases, an official at the ministry said.

The plan will be presented to the European Commission later this month.

France will pledge to keep tax unchanged and will limit annual spending increases to 0.7% on average over the course of the plan. That would already be more stringent than the 1% average increase so far during Emmanuel Macron’s presidency, and the 1.4% prior to that, the official said.

To meet those targets, France will have to undergo structural reforms including an overhaul of its pension system once the economy is back in better shape, the official said. The government aims to set a multi-year spending target that could eventually be enshrined in the constitution, the official added.

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