French economy: the spectrum of the 3% deficit in 2019 resurfaces

Home"TO THE ONE"French economy: the spectrum of the 3% deficit in 2019 resurfaces
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While France expected 2.4% deficit next year, this deficit forecast will increase due, in particular, a change in the accounting treatment of the SNCF

This is something the executive would have done well. According to information from World, the public deficit could be close to 3% of the gross domestic product (GDP) in 2019. Far from the objectives sent to the European Commission in the spring, which forecast 2.4% deficit in 2019, after 2.3% in 2018. A difficulty for France, which had so much trouble getting out of the excessive deficit procedure, keeping it below 3% in 2017 and 2018.

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A communiqué from INSEE, published Thursday, September 6, comes to question everything. According to the statistics institute, the deficit that will be notified in Brussels at the beginning of October will finally be 2.7% for 2017, and no more than 2.6%, as previously thought. This is 0.1 point of GDP more, or about 2 billion euros. INSEE also revised up the deficit for 2016 (3.5% instead of 3.4%).

But that's not all. This increase should also be repeated in 2018 and 2019. This is due to a change in the accounting treatment of SNCF Réseau, the company that manages the railway infrastructure. Unrelated to the announcement in May by the executive of a recovery of the SNCF debt, this change is due to "A harmonization, at European level, of the accounting status of SNCF Réseau", explains to INSEE.

Eurostat and INSEE have indeed agreed that the company should be considered as a public administration. Indeed, its production costs (investments, interest on its debt) are constantly rising, while its market revenues (tolls) increase little. As a result, they now account for less than half of the costs. And "This should happen again in the coming years," indicates a good connoisseur of the file. Unless the financial situation of the company is exceptionally restored, this element is likely to weigh, year after year, on the State accounts.

This new accounting treatment also led to an upward revision of the French public debt, which reached 2 188 billion euros at the end of 2016 (ie 98.2% of GDP) and 2 257 billion euros at the end of 2017 (ie 98%). 5% of GDP, when Bercy thought to have reached 97% last year).

skids

In the cabinet of the Minister of Economy, Bruno Le Maire, it is confirmed that "The reinstatement of these elements will weigh on the deficit to the tune of 0.1 point of GDP this year and next year". But, one assures, the measures announced, at the end of August, by the prime minister, Edouard Philippe, in The Sunday Journal (de-indexation of social benefits, a four-point shift in the wage rate reductions at the SICI, etc.) were already aimed at rectifying the situation. "We will announce the 2019 deficit next week," do we delay at Bercy?

A government source relativizes the consequences of these slippages. "If we had to pass the 3%, we must not forget that the deficit will actually be only 2% since the exceptional expense related to the transformation of the tax credit for competitiveness and employment in perennial decline of the charges represents almost one point of GDP. Then we will defend ourselves before the European Commission: they can not ask us to make structural reforms and blame us when we do. In any case, the Commission will be politically weakened slightly in 2019, since it is in full renewal ... But if we are at 1.5% economic growth in 2019, we will pass the 3% deficit. "

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Still expected at 1.9% in April, growth 2019 is now forecast at 1.7% by the government. Let it come to a standstill again, and new sources of savings should be found.

It is therefore a balancing act that Bercy is confronted with. This already allowed to guess the Mayor, late August, assessing the deficit 2018 around 2.6% and stating: "Our goal is to keep the 3% in 2019."

Source: © French economy: the spectrum of the 3% deficit in 2019 resurfaces

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