France 2022 Deficit Forecast Widens on Macron’s Spending Splurge

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France’s 2022 budget deficit will be wider than forecast only a month ago after President Emmanuel Macron’s government announced plans to contain energy prices, hand out checks to more than half the population, and make high-risk investments in future industrial sectors.

With just six months to go until elections, Prime Minister Jean Castex said Thursday that around 38 million people earning less than 2,000 euros ($2,330) a month will receive 100 euros in “inflation compensation” to shield them against a surging fuel costs. That came after the government already announced it would block gas tariffs and cut electricity taxes, and Macron unveiled the his “France 2030” industrial revival plan. 

A total of 10.2 billion euros of extra spending in 2022 will inflate the deficit to 5% of economic output from 4.8% initially budgeted, while debt will be close to 114%, Finance Minister Bruno Le Maire told journalists in a telephone briefing. 

“This is the strategy for the 2022 budget: invest and protect,” Le Maire said Friday. “Both are equally important.” 

The strength of the economic rebound and a surge in inflation has caught European governments off guard. At this point in time, Le Maire has said he was expecting to be dealing with high unemployment and cascading bankruptcies, rather than needing to repeatedly tweak policy to deal with a dynamic recovery. 

“We are in a period of transition and that is always a delicate moment in the history of a country,” Le Maire said. “There are necessary adjustments between supply and demand and tensions on raw materials.” 

• Inflation compensation will cost 3.82 billion euros spread over this year and next
• Putting a ceiling on electricity prices and compensating gas prices add 5.9 billion euros and 1.2 billion euros, respectively, to the 2022 budget
• 2.8 billion euros will be added to next year’s plans as part of the long-term France 2030 investment program
• 2022 budget will also include another 1.2 billion euros for training measures that Macron will detail in coming weeks

Still, Le Maire said there are positive surprises for 2021 finances as faster job creation and stronger growth will bring in 4.7 billion euros in extra revenue for the government. The 2021 budget deficit will be 8.1% of economic output, instead of 8.4% previously forecast, Le Maire said. 

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