Deficit and Debt: Brussels Releases Recommendations to Revive France

A public deficit and a debt to reduce

France continues to face significant challenges in public finance management. In 2023, the public deficit was 5.5% of GDP, while the ratio of public debt reached 110.6%, a level well above the average for the European Union.

In a report published on June 19, the European Commission states that « the sustainability of public debt in the medium term is a major concern ». It emphasizes the need for France to reduce its structural deficits and implement stricter fiscal measures to contain the dynamics of public spending.

Among the recommendations made, the Commission encourages Paris to continue and intensify efforts to reduce tax loopholes. According to the report, these loopholes are « too numerous and represent a heavy budgetary burden ». Brussels considers that their abolition would make the French tax system « more efficient and transparent ». It also recommends the implementation of a review program for spending, aimed at improving the efficiency of public spending and identifying potential savings.

Another proposed focus is the improvement of productivity and competitiveness. The Commission welcomes the reductions in production tax implemented since 2021, as well as the planned gradual abolition of the Business Value Added Contribution (CVAE). These measures, combined with increased support for research and development, should help stimulate long-term economic growth and reduce pressure on public finances.

Annonce

SME financing is not sufficiently supported

The report highlights the difficulties encountered by small and medium-sized enterprises (SMEs) in France in terms of financing. SMEs, which represent an essential part of the country's economic fabric, struggle to access the loans necessary for their development. This situation limits their ability to innovate, modernize and create jobs.

The Commission notes that « SMEs encounter significant obstacles to accessing financing, which hampers their growth and competitiveness. » To remedy this situation, Brussels recommends strengthening dedicated financing mechanisms. It suggests, for example, increasing public guarantees on loans granted and developing innovative financial instruments such as venture capital.

The Commission also calls for a simplification of administrative procedures. French complexity is perceived as a major barrier to entrepreneurship. According to the report, « reducing bureaucracy and simplifying administrative procedures would allow SMEs to focus more on their main activity and fully exploit their growth potential ».

Finally, Brussels emphasizes the need to improve SMEs' access to international markets. The report thus recommends the establishment of export support programs and the promotion of French products abroad. By facilitating access to global markets, these initiatives would help diversify SMEs' sources of revenue and strengthen their resilience in the face of national economic fluctuations.

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The labor market and education need to be revived

The European Commission views the unemployment rate as too high, as it surpasses the average of EU countries. In parallel, it identifies skills shortages in some sectors. According to the report, several factors contribute to this situation, including skills mismatch and entry barriers to the job market for certain groups.

To revive the job market, Brussels proposes a series of measures aimed at improving employability and reducing disparities. The Commission recommends strengthening continuing education programs and retraining to meet the needs of growing sectors. According to them, “investing in training and professional development is essential to fill skills gaps and improve labor productivity”.

Brussels also highlights the importance of attracting and retaining talent in the education sector. The results of the 2022 PISA test show that French students continue to perform below the OECD average in mathematics and reading. The Commission advocates for improving teachers' working conditions and giving more autonomy to schools. “This can be done by granting more autonomy to schools and greater teaching freedom”, estimates Brussels.

Finally, the report emphasizes the inclusion of disadvantaged groups in the labor market. It advises specific measures to support the employment of young people, low-skilled individuals, and migrants. Initiatives such as hiring subsidies, apprenticeship programs, and professional mobility aids are deemed essential to improve employment rates and promote inclusive growth.

Neither the report nor these advices have binding power. However, they do serve as a warning: if the Commission implements a procedure for excessive deficit against the country, it will issue recommendations. France will then have to comply within 6 months, or face a fine of up to over 2 billion euros per year.