(Bloomberg) — President Emmanuel Macron’s plan for revamping France’s long-term economic prospects and restoring its deficit-ridden public finances is running into difficulties after the government cut the outlook for economic growth.
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With Europe mired in an extended period of near-stagnation, Finance Minister Bruno Le Maire on Sunday lowered the 2024 growth forecast to 1% from 1.4%.
The weaker outlook also pushed him to announce €10 billion euros ($10.8 billion) in spending cuts to meet commitments on reducing the country’s budget deficit to 4.4% this year.
“The principle of responsibility is to act at the right moment with rigor but without brutality to keep control of our public finances, deficits and debts,” Le Maire said Sunday in a television interview to announce the measures.
Read more: France Lowers Its 2024 Economic Growth Forecast to 1%
The deterioration in France’s prospects is a major blow to Macron. Until now, he had set out to improve France’s fiscal position without austerity or tax hikes, instead relying on stronger economic growth that he said would come from pro-business and labor-market reforms.
“I am committed to not increasing taxes,” said Le Maire, who has been in his role since Macron was first elected in 2017. “We have cut them and won’t deviate from this line. French people can’t bear any more tax.”
Macron’s approach has already come under increased scrutiny after spending ballooned during the Covid-19 pandemic and again in the energy crisis sparked by the war in Ukraine. In December, S&P Global Ratings kept a negative outlook on France’s credit rating and cautioned it could downgrade at some point this year, depending on how government spending and economic performance affect public finances.
Macron’s economic strategy is also under pressure after unemployment rose last year and companies in sectors from finance to construction prepare for more layoffs.
In September, France presented a first step toward tackling high debt with €16 billion of savings to reduce its deficit to 4.4% of economic output in 2024 from 4.9% last year. But most of that will come from withdrawing vast support provided to households and firms during the energy crisis, and the plan relied on stronger economic growth.
“It’s still positive growth but it takes into account the new geopolitical context,” Le Maire said Sunday. He cited the wars in Ukraine and the Middle East, a slowdown in China and recession in Germany as taking a toll on the French economy.
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