The second-large euro area report, in new macroeconomic shocks, is a risk, according to the country’s audit service. The Cour des Comptes warned that the current plans to restore France’s “concerned” public finances are already lacking credibility, as political parties with expansionist taxation and spending policies struggle to form a new government after the early elections giving rise to doubts about the future in the French economy. President Emanuel Macron’s outgoing government promised in April new spending cuts and revenue strengthening measures to return to alignment with derailed plans to reduce the budget deficit to 3% of GDP in 2027. But the state auditor said Monday (15.07.2024) that the updated program was based on “particularly optimistic” growth forecasts, unprecedented cost cuts and unclear measures to boost tax revenue. The government also appeared not to have calculated the aggravating effects of such a tightening, he added. “This course does not seem to be very reliable or very realistic,” the Cour des Comptes announced. “France’s public finances are therefore in a worrying situation”. The assessment is another ‘red flag’ for the second largest economy in the eurozone, whose next government should find more than EUR 15 billion in additional revenue or savings annually to meet the European Union’s requirements, according to Bloomberg. France’s budget is already covered by uncertainty after the turbulent elections. At one point during the campaign, the sale of French bonds led the premium to the country’s loan costs compared to Germany at the highest level since the Eurozone’s public debt crisis a decade ago. While tensions in the market have since been deflated, as no party won the absolute majority needed to have free will in the budget, the New People’s Front promising a huge increase in public spending emerged first with the largest number of seats. Nevertheless, the New People’s Front should ease its proposals to form any government capable of gathering the majority. Current Finance Minister Bruno Le Mer opened the door to reach a consensus on specific plans, but limited the margins of compromise warning that the Left manifesto is a danger to France and that Macron’s plans for fiscal consolidation should not be weakened. In a written response to the audit service’s report, Le Mer and the budget minister said the finance ministry shares many of the observations. But they completed that the government made unprecedented efforts to correct the budget this year and that the high debt and deficit in 2023 were the result of the choices to protect economic growth and address inflation. “More restrictive and less protective choices for public finances would surely have created more social difficulties and less growth and wealth creation, without any guarantee that the final balance of public finances would be better,” Le Mer said. Bank of France Governor Villeroy de Galaud also warned that there is no “hidden treasure” and said the next government would undermine the country’s sovereignty if it led to deeper deficits. Even before the election, France was targeted by investors after the country was downgraded by S&P Global Ratings. In preparing the elections, the European Union also initiated an excessive deficit procedure against Paris. The Cour des Comptes said that France is increasingly diverging from other European countries in its efforts to limit the deficit after the pandemic and the energy crisis. The highest debt cost limits all other costs and investments and leaves France “dangerously exposed” if there is any other financial shock, he commented. “It is vital, as the current stability programme predicts, to return the deficit below 3% of economic production and put the debt on a declining path,” according to EU rules, the agency announced. “But this effort should be made on the basis of more realistic and more reliable predictions than is happening today”.