the executive power uses the aircraft to control the deficit in one way or another

Officially, the government "Stay on course and keep it up!" reforms, according to the formula of Edouard Philippe. The announcements made by the Prime Minister last weekend, however, point to a bending in fiscal policy led by the government. The slowdown in growth forces it to use two old techniques that the "old world" would not have denied: let the deficit come to some side in order not to stifle a bit more economic activity – it will emerge next year, according to our information, between 2.6% and 3% of GDP – and draw up a plan to manage despite all government expenditure.

In any case, the government is no longer mysterious about the accumulation of clouds in front of the economic situation. In an interview in the "Journal du Dimanche", Edouard Philippe announced that the draft budget law for 2019 would be based on a growth of 1.7%, while the previous prediction was higher, namely 1.9%.

Inescapable review

This downward revision was seen by economists as unavoidable for a few weeks, and the question was whether the executive would choose additional savings to maintain deficit targets, even to stifle a little more activity. Ultimately, this is not the choice made, and it has even been decided to let the deficit slip away a bit.

"In 2019 there will be a revival of the deficit", explains Edouard Philippe. According to our information, it should therefore be close to 2.6% of GDP in 2018. Even if tax revenues are good, it still exceeds the 2.3% expected in July. For the next year, the deficit should be between 2.6% and 3%, of which 0.9% would be due to the costly transformation next year of CICE in the field of sustainable cost reduction. "It is certainly a higher figure than expected, but we had to make choices and we made one of the reductions in compulsory charges", says a government source.

Parametric reform

In addition, savings have also been revealed to meet a different promise from the government, namely the decrease in government spending. Up to now, Emmanuel Macron and Edouard Philippe declared that they refused "parametric reforms," ​​an elegant way of referring to aircraft strikes. Nevertheless, the choices in this area are furiously similar to the plan: some social benefits (pensions, PLA, family allowances) will only be revalued by 0.3%, while inflation is expected at a level close to 1.7%.

This minimum revaluation should, according to our information, yield a saving of nearly 3 billion euros. On the other hand, certain benefits, and in particular the RSA, are spared by this decision, as well as certain minimums (premium of activity, disabled adult allowance and minimum age) of which the increase was part of the promises of the Emmanuel Macron campaign.

4,500 fewer civil servants

This choice for social benefits is explained by the various restrictions that Emmanuel Macron had imposed on himself. By refusing to influence the calculation of pensions in the context of the pension reform, and without any measure that is too heavy for the health system when a reform of hospitals is expected, little remained that this quasi freeze of the benefits to to find savings, according to a source from the government. Particularly because the executive has difficulty achieving savings through the contraction of public services: in 2019 about 4,500 positions will be eliminated, after 1,600 in 2018. The target of 50,000 public officials less in the sphere of the state seems far away even if Edouard Philippe swears that it remains relevant.

Matignon can not talk, however "Plane". "The plane is when everyone is treated under the same roof.This is not the case, because we make strong choices in favor of returning to work through de-socialized overtime and in favor of the most vulnerable with the revaluation of the RSA"say Matignon.

Moreover, the 2019 budget will not be free of more structural measures. According to our information, the new reduction in subsidized jobs – which would increase from 200,000 to 100,000 – would result in one billion savings. Other economies could follow a longer horizon if the reform of the unemployment insurance system succeeds with the expected ambition level. In this respect, the question of the degressivity of unemployment benefits is raised. "We will not have taboos or presuppositions," Edouard announces Philippe.

Renaud Honoré

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