Macron’s Economic Revamp Faces Challenges

President Emmanuel Macron’s ambitious plan to overhaul France’s long-term economic outlook and address its deficit-ridden public finances encounters hurdles as the government revises down growth projections.

With Europe grappling with prolonged near-stagnation, Finance Minister Bruno Le Maire adjusted the growth forecast for this year from 1.4% to 1%. This downgrade prompted him to unveil €10 billion euros ($10.8 billion) in spending cuts to fulfil commitments aimed at reducing the country’s budget deficit.

“The principle of responsibility is to act at the right moment with rigour but without brutality to keep control of our public finances, deficits, and debts,” Le Maire stated in an interview with TF1 television to announce the measures.

Budget Minister Thomas Cazenave indicated on Monday that it is “very probable” the government will need to save more than €12 billion next year.

The downward revision in France’s economic prospects represents a significant setback for Macron, who had sought to improve the nation’s fiscal standing without resorting to austerity measures or tax hikes. Instead, he relied on pro-business and labor-market reforms to stimulate stronger economic growth.

“I am committed to not increasing taxes,” asserted Le Maire, who has held his position since Macron’s election in 2017. “We have cut them and won’t deviate from this line. French people can’t bear any more tax.”

Macron’s strategy has faced increased scrutiny following significant spending during the Covid-19 pandemic and the subsequent energy crisis triggered by the conflict in Ukraine. S&P Global Ratings maintained a negative outlook on France’s credit rating in December, warning of a potential downgrade depending on government spending and economic performance.

Asked about concerns regarding potential rating agency downgrades, Cazenave emphasised the government’s proactive approach in addressing economic challenges, signalling confidence in its management of public finances.

Macron’s economic agenda faces additional pressure as unemployment rose last year, and companies across various sectors brace for further layoffs. In September, France outlined initial steps to address high debt levels, including €16 billion in savings to reduce the deficit.

“It’s still positive growth, but it takes into account the new geopolitical context,” Le Maire noted, citing conflicts in Ukraine and the Middle East, a slowdown in China, and recession in Germany as factors impacting the French economy.