The European Commission launched the termination of the excessive deficit procedure targeting France since 2009 this Thursday. However, the government will have to mitigate the uncertainties affecting the post-2019 budget trajectory to reassure Brussels.
The European Commission has officially noted that France is expected to keep its public deficit below 3% of GDP for two consecutive years in 2017 and 2018, a situation that has not occurred in the past 10 years: the European executive expects this indicator to stand at 2.3% this year, matching the forecast by Bercy, following the 2.6% recorded in 2017.
The Commission also estimates French growth at 2% this year. For 2019, Brussels anticipates an increase in the public deficit to 2.8% (due to the transformation of the CICE into a permanent reduction of charges), while Bercy forecasts 2.4%, citing new but unspecified savings.
Brussels and Paris also differ on the extent of the slowdown in growth for the coming year (+1.8% according to the Commission, +1.9% according to Bercy).
Following this announcement, the Commission is expected to end the excessive deficit procedure in which France has been entangled since 2009 on May 23rd, during the presentation of its recommendations to the Eurozone countries.
Nevertheless, the return below the 3% threshold does not eliminate the need for effort. France will enter the preventive arm of the Stability Pact. This includes the obligation to reduce the structural deficit (excluding cyclical effects) by at least 0.5% of GDP annually.
