Not only is government spending excessive, but debt levels in Europe's third-largest economy are now dwarfed by the EU's Greece and Italy.
“The French state is clearly living beyond its means,” said Maxime Darmet, an economist at Paris-based insurance company Allianz Trade.
It's not because of a lack of taxes. France has the highest burden of all her OECD countries, which are mostly made up of rich countries.
President Macron has pledged to reduce the budget deficit to the EU's 3% target by the end of his term in 2027. To do so, it will need to secure an additional 70 billion euros a year in funding, either through spending cuts or tax increases.
With fiscal confidence at stake, he reiterated his commitment to cutting public spending. President Macron announced cuts of 10 billion euros this year and 12 billion euros in 2025.
“The first expense they're most likely to cut is unemployment benefits,” Dahme said. “The total amount will be around 80 billion euros. After that, we might target a housing allowance of around 16 billion euros.”
But, he added, “on top of that, their hands are tied.”
Like the UK, waiting times have soared in France's health system since the pandemic, and health budgets are unlikely to be cut.
According to the French Hospital Federation, it takes on average 10 days to get an appointment with a general doctor, compared to just four days in 2019.
Cuts to the defense budget are also off the table, given the growing threat posed by President Vladimir Putin. After significantly increasing military spending, France will meet only 2% of NATO's spending target this year and steadily plans to further expand military spending.
“The problem is clearly pensions, which are the biggest expenditure item at around 320 billion euros a year,” Dahme said. “They could potentially save in pensions, but the ministers and the president have ruled out any cuts because retirees are Macron's largest constituency.
“Finding new savings is becoming increasingly difficult.”
Once unthinkable, many now believe that raising taxes may be the only option.
