Futuribles Journal n° 398

Économie, emploi

The French Public Finances in Perspective: Medium- and Long-term Scenarios

“The day has come when the accumulation of deficits and of uncontrolled spending since 1975, the year of the last balanced state budget, is decidedly compromising politicians’ scope for action”, wrote Alexandre Siné in 2005 in the opening lines of an article on the intolerable rigidity of public expenditure in France (issue 313). Eight years and one painful economic crisis later, what is the state of the French public finances? Without going over the history of the state’s financial situation in detail, Karim Triki and Gilles Dufrénot remind us here of the current conditions: a fierce economic crisis that has substantially affected the progression of GDP, to which the government is striving to respond with budgetary consolidation measures that are, admittedly, aimed at improving the situation of the public finances (mainly through tax revenues), but could also have a lasting negative impact on economic growth and hence thwart the efforts at consolidation currently being undertaken.

In this context, how might public finances develop in France in the long term? Given the demographic prospects (an ageing population) and their consequences for public expenditure, the authors envisage two possible future scenarios for the French economy up to 2020 and 2050. There is a gloomy scenario in which the macroeconomic situation would continue to deteriorate and a bright scenario in which it would improve thanks to an international upturn and the beneficial effects of budgetary adjustment. Within these two scenarios they propose two variants for the development of the public finances, one without budgetary adjustment and the other with consolidation. Overall, they stress that there is little chance of the scenarios without budgetary adjustment becoming reality. At this point, the gloomy scenario with adjustment seems the most likely, allowing ministers little room for manoeuvre, whereas the most desirable scenario (the bright one with budgetary consolidation) would offer better prospects for France and almost certainly an opportunity to undertake the structural reforms that have become essential.

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