France targets 16 billion euros in savings next year, trims growth outlook

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France targets 16 billion euros in savings next year, trims growth outlook

By Leigh Thomas

PARIS (Reuters) – The French government aims to squeeze 16 billion euros ($17 billion) in savings from its 2024 budget, finance minister Bruno Le Maire said on Thursday as he trimmed France’s growth outlook.

Le Maire said 10 billion euros in savings would come from scrapping caps on power and gas prices, put in place to soften the pain for households from Europe’s energy price crisis.

The rest would come from a 4.5 billion euro reduction in state aid to companies, as well as lower spending on labour market support measures and unemployment benefits.

The government has already cut spending this year by 5 billion euros and further cuts next year are necessary to keep its deficit reduction plans on track, which aim to cut the fiscal shortfall from 4.9% of GDP this year to 2.7% in 2027.

Complicating that task, the euro zone’s second-biggest economy is now expected to grow slightly slower next year than previously expected, Le Maire said as he outlined the main economic forecasts for the 2024 budget bill to be presented later this month.

“Germany’s recession, China’s difficulties and high interest rates will have an impact on 2024 growth,” he told journalists, trimming his forecast to 1.4% from 1.6%.

That nonetheless remain better than the 1% expected this year.

Le Maire said the inflation shock over the last year would further subside, boosting household consumption – the traditional motor of French economic growth.

He said French inflation should ease from 4.9% this year to 2.6% in 2024, nearing the European Central Bank’s target and offering consumers relief.

While the government aims to cut spending, it would nonetheless increase some expenditures, with 4 billion euros more earmarked for the interior ministry and the armed forces.

A further 7 billion euros has been set aside for environmentally friendly investments due to be presented later this month and financed by removing some of the tax breaks which some industries get on their on fossil fuel use.

However, any extra income to the state coffers from a planned reduction in a tax break on farmers’ and builders’ diesel fuel between 2024 and 2030 would be used to help them start using biofuels, Le Maire said.

($1 = 0.9381 euros)

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