SITUATION AND OUTLOOK
ON FRENCH PUBLIC FINANCES
Tuesday, 30th June 2020
EXCEPTIONAL CIRCUMSTANCES
Cour des comptes –
Situation and outlook on French public finances
2
An evolving situation
Massive revisions to economic assumptions and public finance
forecasts
Two Amending Finance Acts and a third draft of Amending Finance
Act
A tailored report
An analysis of the prospects centred on the issue of public debt
sustainability
06/07/2020
AN INCOMPLETE RECOVERY
IN 2019
SINCE 2008, A SIGNIFICANT INCREASE IN
MANDATORY LEVIES (ML) WAS FOLLOWED BY A
SLOW DECLINE IN MANDATORY LEVIES (ML).
Cour des comptes – Situation and outlook on French public finances
4
Cumulative effect of new measures in ML
(in GDP points)
Source: Cour des comptes
06/07/2020
-0,5
-1,3
-1,1
-0,1
1,0
2,4
2,6
2,5
2,3
2,5
2,1
1,2
1,7
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Excluding
transformation of CICE
and effect of
France
Compétences
’
consolidation scope
SINCE 2007, PUBLIC SPENDING IS INSUFFICIENTLY
CURTAILED
Cour des comptes – Situation and outlook on French public finances
5
Breakdown of the evolution of public expenditure from 2007 to 2019
(in GDP points, excluding tax credit)
Source: Cour des comptes based on Insee
Social benefits: +2,5
Grants and other operating expenses:
+0,7
Changes in consolidation scope: +0,4
Payroll: -0,1
Investments : -0,3
Interest expense: -1,2
+2
GDP
points
06/07/2020
IN 2019, A GENERAL GOVERNMENT DEFICIT OF 3 POINTS
OF GDP, WITHOUT STRUCTURAL IMPROVEMENT
Cour des comptes – Situation and outlook on French public finances
6
General government balance
(GDP points)
Source: Cour des comptes based on Insee
-8,0
-7,0
-6,0
-5,0
-4,0
-3,0
-2,0
-1,0
0,0
2000
2003
2006
2009
2012
2015
2018
Transformation
of CICE (0.9
point of GDP)
in 2019
06/07/2020
The structural
deficit remains
unchanged at 2.2
points of GDP as in
2018.
IN 2019, LIMITED INCREASE IN REVENUE DUE TO NEW
MEASURES
Cour des comptes – Situation and outlook on French public finances
7
Evolution of mandatory levies in 2019 at constant scope
Source: Ministry for Economy and Finances, Cour des comptes
Effect of GDP growth
in value: +29,1 bn
€
Elasticity effect: +6,9 bn
€
Effect of new measures:
-29,9 bn
€
of which -
€
20bn for the transformation
of the CICE and -
€
9.9bn for other
measures
ML evolution
in 2019 :
+6,1 bn
€
(or +0,6 %)
06/07/2020
IN 2019, MORE DYNAMIC PUBLIC SPENDING
Cour des comptes – Situation and outlook on French public finances
8
Change in public expenditure at constant scope (in %)
1,7%
2,5%
0,7%
2,3%
1,9%
2,0%
1,4%
2,8%
Moy. 2011-2016
2017
2018
2019
Source : Cour des comptes based on Insee
06/07/2020
Government expenditure excluding tax credits
Public expenditure controllable by public authorities
PERSISTENT DEFICITS, A DEBT THAT IS NOT SHRINKING
Cour des comptes – Situation and outlook on French public finances
9
Public deficit and structural deficit of
France
Source: Cour des comptes based on the European Commission and Eurostat
French and German debt
06/07/2020
AN UNPRECEDENTED SHOCK FOR
PUBLIC FINANCES IN 2020
MASSIVELY REVISED DEFICIT FORECASTS
Cour des comptes – Situation and outlook on French public finances
11
Public balance 2020: transition from the LFI to the PLFR3
(in
€
bn and GDP points)
Source: Cour des comptes
06/07/2020
Rather cautious
assumption of 11%
GDP contraction
Revenues = 1st
revision factor
Support costs = 2nd
factor
-250
bn
€
-53,5
bn
€
-133
bn
€
-64
bn
€
-11,4 GDP
points
-2,2 GDP
points
Upward
revision of
expenses
Downward
revision of
2020
revenues
A FALL IN REVENUES REFLECTING THE GDP
CONTRACTION
Cour des comptes – Situation and outlook on French public finances
12
Evolution of mandatory levies in 2020 (PLFR 3)
Source: Cour des comptes
Other effects : +2 bn
€
Effect of GDP contradiction in value:
-101,6 bn
€
Evolution of ML
in 2020 :
-103,5 bn
€
(or -9,5 %)
Of which +
€
0.7bn for
elasticity, +
€
13.6bn for
the impact of the CICE
transformation and -
€
12.3bn for other
measures
06/07/2020
EXTENSIVE SUPPORT MEASURES
Cour des comptes – Situation and outlook on French public finances
13
Main categories of support measures
(in bn
€
)
Measures with an
impact on the
deficit; 57.5
Measures
deemed to have
no impact on the
deficit; 77.5
Guarantee
measures (with
no 2020 effect on
the deficit); 327,5
Source: Cour des comptes
Partial activity
30,8
Solidarity Fund for
enterprises (APU
share) and bonus for
the self-employed
9,0
Exceptional health
expenses
8,0
Exemptions from social
security contributions
and sectoral support
measures
9,8
06/07/2020
A VIGOROUS INCREASE IN SPENDING IN RESPONSE
TO THE CRISIS
Cour des comptes – Situation and outlook on French public finances
14
Change in the value of public expenditure
(excluding tax credits)
1,7 %
2,2 %
4,2 %
Mean
2011-2019
2020
(PLFR 3)
6,4 %
in total
Overall balanced risks on
usual expenses
Risks difficult to quantify on
capital injections and
guarantees
06/07/2020
Source: Cour des comptes
-12
-10
-8
-6
-4
-2
0
2
4
2019
2020
0
20
40
60
80
100
120
140
160
2019
2020
A JUMP IN DEFICITS AMONG FRANCE'S PARTNERS IN 2020
Cour des comptes – Situation and outlook on French public finances
15
Government deficit
(in GDP points)
Sources: Cour des comptes based on the European Commission
Public debt
(in GDP points)
06/07/2020
THE CHALLENGE OF DEBT
SUSTAINABILITY AFTER 2020
A MASSIVE BUT VARIABLE IMPACT OF THE CRISIS ON
PUBLIC FINANCES DEPENDING ON THE SCENARIOS
Cour des comptes – Situation and outlook on French public finances
17
GDP volume trajectory in three
scenarios
(in
€
bn)
Government balance in each of the
three scenarios
(in GDP points)
Source: Cour des comptes
2 000
2 100
2 200
2 300
2 400
2 500
2 600
2 700
2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030
scénario de rattrapage
scénario de perte limitée
scénario de faiblesse persistante
-12%
-10%
-8%
-6%
-4%
-2%
0%
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
scénario de rattrapage
scénario de perte limitée
scénario de faiblesse persistante
THE RISK OF UNCONTROLLED PUBLIC DEBT
Cour des comptes – Situation and outlook on French public finances
18
Evolution of public debt following three scenarios
(in GDP points)
Source: Cour des comptes
06/07/2020
90%
100%
110%
120%
130%
140%
150%
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
scénario de rattrapage
scénario de perte limitée
scénario de faiblesse persistante
THE PRINCIPLES OF A STRATEGY FOR THE REPAIR OF
PUBLIC FINANCES (1/3)
Cour des comptes – Situation and outlook on French public finances
19
Sustainable
public finances
The structural
adjustment
trajectory must be
undertaken in a
timely manner
Any additional
"stimulus" measures
must be targeted and
temporary
(sunset clauses)
A European initiative
can contribute to
recovery without
adding to the
national debt
TODAY
TOMORROW
06/07/2020
High debt, low rates:
avoid making a hasty
fiscal adjustment but
avoid putting it off
indefinitely
THE PRINCIPLES OF A STRATEGY FOR THE REPAIR OF
PUBLIC FINANCES (2/3)
Cour des comptes – Situation and outlook on French public finances
20
High initial effort
followed by a stop
« Budgetary
strain »
Constant rate of
structural effort
Medium-term strategy
defined without undue delay
in the LPFP
Set consistent targets for
expenditure and new
measures (revenue)
Efforts to be sustained until
the medium-term objective
has been reached
+
06/07/2020
THE PRINCIPLES OF A STRATEGY FOR THE REPAIR OF
PUBLIC FINANCES (3/3)
21
A recovery in
public finances
to be achieved
over time
Identifying
priority
spending
Prioritizing
investments
by ensuring
their
effectiveness
Cour des comptes – Situation and outlook on French public finances
06/07/2020
SITUATION AND OUTLOOK
ON FRENCH PUBLIC FINANCES
Tuesday, 30th June 2020