French Senate Budget Rapporteur Warns of Potential Recession and Deficit Risks

The Senate budget general rapporteur in France, Christine Lavarde, warned that an economic recession cannot be ruled out for the upcoming year, sharply criticizing the government's economic projections. During a committee meeting where her general report on the economic and financial context was adopted, Lavarde stated that building a budget on overly optimistic hypotheses creates the risk of renewed disillusionment, emphasizing that optimism is not a viable fiscal strategy.

Lavarde argued that the government's projected one percent growth rate for next year is completely detached from reality. She noted that the country currently sits between unfavorable and very unfavorable macroeconomic scenarios outlined by the Bank of France. Numerous external risks, including restrictive monetary policies, climate risks, geopolitical tensions, and potential disruptions from high energy prices, threaten to impede economic activity.

The senatorial report also highlights severe concerns regarding the national debt, warning that the tightening economic noose and rising interest rates are causing debt servicing costs to surge. Lavarde cautioned that a significant portion of the budget effort for next year will be consumed by additional interest payments, meaning the risk of a European Central Bank intervention or a financing crisis can no longer be dismissed.

Furthermore, Lavarde criticized the government for relying too heavily on revenue increases rather than structural spending cuts for the third consecutive year. She pointed out that mandatory tax levies are expected to rise to forty-four point two percent of the Gross Domestic Product, with tax revenues increasing by eighteen billion euros largely due to the creation or extension of taxes rather than organic economic growth.

Contradicting government claims of a spending freeze, the rapporteur stated that state expenditures continue to rise and that public employee numbers are expanding. She maintained that without the contributions of local authorities and social security administrations, the public deficit would widen even further. Lavarde pledged that during upcoming Senate deliberations, she would refuse to worsen the deficit by even a single euro and would work to shift the fiscal burden away from mandatory tax hikes.

Meanwhile, the government has maintained its economic forecasts for the current year, projecting zero point five percent growth and a public deficit of five point four percent. However, independent bodies such as the High Council of Public Finances have questioned these figures as the French economy experiences a period of stagnation, with recent data showing a minor contraction in the Gross Domestic Product during the third quarter.