(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.
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.
“We mustn't make the error of 2009 when we tried to immediately repair public finances,” Finance Minister Bruno Le Maire said Friday on Sud Radio. “We need to do it at the right moment that doesn't kill the return of growth.”
The plan will be presented to the European Commission later this month.
| 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | 2026 | 2027 | |
|---|---|---|---|---|---|---|---|---|---|
| GDP growth | 1.5% | -8.2% | 5% | 4% | 2.3% | 1.5% | 1.4% | 1.4% | 1.4% |
| Deficit/GDP | 3.1% | 9.2% | 9% | 5.3% | 4.4% | 3.9% | 3.5% | 3.2% | 2.8% |
| Debt/GDP | 97.6% | 115.7% | 117.8% | 116.3% | 117.2% | 118% | 118.3% | 118.2% | 117.7% |
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.
“Raising taxes would weaken the return to growth, it would ruin confidence,” Le Maire said. “We need to find other solutions.”
France will have to undergo structural reforms including an overhaul of its pension system once the economy is back in better shape, Le Maire said. He also wants to set a five-year spending target.
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