The Court of Auditors does not believe in the return of growth to reduce the debt

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There is at least one thing that does not change between the before and the post-Covid period: it is the way in which the Court of Auditors dissects report after report the deterioration of public finances. In its annual report on the subject made public on Tuesday, the public accounts watch considers perfectly legitimate the way in which the State, faced with the emergency, has played its role of“Insurer of last resort” economy and income. “If, for some, the crisis has already had dramatic consequences, she points out, most of its economic cost has not yet been “paid”: it has been transferred to public debt. “ Nor does it defend immediate screw tightening to contain coronavirus shock «massif» on public finances, with public debt which should jump by almost 270 billion euros in 2020 and exceed 120 points of GDP. Or the equivalent of a “debt on the cradle” as it is called, which will amount to almost 40,000 euros on each new French. The effort, she writes, “Must not be too brutal in order not to break the recovery, but it must be pursued constantly to obtain tangible results”.

However, the government must not wait to program now and “in the time” a deleveraging that is not going to be solved by a simple “Spontaneous rebalancing” by simply betting on a return to growth from 2021. A discourse somewhat different from the little music maintained by the executive and according to which the return of activity from next year will almost naturally put the France on a trajectory of return to balance in public finances. “It would be unwise to count on the simple return of growth to control our debt trajectory”, therefore warned the new first president of the Court of Auditors, Pierre Moscovici, former European Commissioner for Economic Affairs and former Minister of Economy and Finance under the quinquennium of François Hollande. “I believe in seriousness, but not in austerity”, said the one who, during his time at the head of Bercy from 2012 to 2014, had implemented the increase in compulsory levies wanted by the former socialist president in the name of social justice, before saying a little more late “Very sensitive to the tax fatigue of the French”.

250 billion holes at the end of the year

While we are probably far from having finished with the sectoral stimulus plans and support for the economy and households (the stimulus measures planned for the start of the school year already provide 15 billion euros for the ecological conversion announced Emmanuel Macron), the report recommends that “The growth in public spending is significantly lower than that observed in recent years”. A challenge that would not be impossible according to the magistrates of rue Cambon, according to whom it is possible “To significantly reduce the debt burden without having a lasting impact on growth”. You only have to look, the report indicates on several occasions, what Germany did, managed to reduce it to less than 60% of the GDP before the pandemic and whose budgetary room for maneuver is, this fact, much higher today than that of France to face the crisis.

To limit this debt and give guarantees of the French will, “Beyond short-term measures, to rebuild a public finance strategy”, the Court of Auditors suggests different actions. If she believes the government’s deficit forecast is “Globally balanced” (understand sincere) with a budget hole of 250 billion euros at the end of the year – against 50 billion planned before the coronavirus – and a debt reaching 120% of GDP, it would not be reasonable to continue to charge the boat .

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In this perspective, the future stimulus plan announced for the start of the school year must be “Targeted and not to be financed by debt” national, recommends the Court of Auditors, recommending to rely on the funding provided in the context of the European recovery of 750 billion euros. She believes in passing that if further tax cuts are seen, after those already made in 2019 and then in 2020 in response to the movement of yellow vests, they should be accompanied “Increases in other withdrawals or elimination of niches” or equivalent spending cuts.

Debt must remain “sustainable”

For the Court of Auditors, which recognizes that the risks of financial crisis are immediate “Weak” due to zero interest rates, “The additional debt caused by the crisis, like that resulting from past deficits, has not disappeared, and they cannot be erased”. Hence the importance it remains “Sustainable”. Sketching three scenarios from 2021, she estimates that in the worst case the deficit would remain lasting longer than 6%, with debt at 140% of GDP. At best, France would find the public deficit forecast for this year before the coronavirus, well below the 3% mark, but with a public debt that would still exceed 100%.

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In the eyes of the court, it is in particular advisable to give priority to spending quality by preserving and even increasing public investment, as in ecological transition or public health – the two priorities. In recent years, these expenses have tended to crumble in favor of operating expenses after a peak dating back to the early 1990s, recalls the report. In 2018, they grew by only 4.1% in France compared to 6.9% in the European Union and 7.1% in Germany, also known for its aging infrastructure. Spend better without spending more, easier said in a report than done.

Christophe Alix



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