French Prime Minister Targets €40 Billion in Public Spending Cuts
Agnès Verdier-Molinié outlines potential savings across local governments, state operations, and social security.
The French government, under Prime Minister François Bayrou, is pursuing an ambitious financial strategy aiming to save €40 billion to stabilize public finances.
Agnès Verdier-Molinié, an expert from the Fondation IFRAP, has indicated that this objective is achievable through targeted reductions in public spending.
She emphasizes that the achievement of this goal hinges on addressing expenditures at various levels: local governments, the state, and social security.
Verdier-Molinié asserts that local communities account for approximately 20% of public expenditures, suggesting that efficiencies could yield between €7 and €8 billion in savings if these entities aligned their operational expenditures with the national average.
Furthermore, she notes that if local governments were to adopt the spending levels of the least expensive 10% of similar entities, potential savings could rise to €30 billion.
Her analysis highlights significant disparities in fiscal management among local authorities, indicating that some are effectively managed while others are not.
The proposed savings exclude social and investment expenditures.
Turning to state spending, Verdier-Molinié points out that while the state has begun to reduce its budget between 2023 and 2024, expenditures from state operators continue to escalate.
If these expenditures had mirrored those of the state, an additional €800 million could have been saved in 2024. Notably, local public administrations observed a substantial increase in their expenditures, totaling €13.9 billion year-on-year, while social security expenditures surged by €40.3 billion in 2024.
A significant factor contributing to rising costs is the remuneration and staffing levels of public employees.
Verdier-Molinié outlines that aligning personnel costs with average expenditures could yield savings of up to €3 billion, while matching the lowest-spending 10% of local authorities could lead to savings up to €13 billion.
In addressing the 434 state operators, Verdier-Molinié suggests that reviewing their missions could unlock new savings.
She advocates for a strategy that includes the elimination, merging, and privatization of certain entities where duplication of services occurs, particularly among environmental agencies.
This would necessitate a comprehensive evaluation of public organizations and their operational overlaps.
The allocation of subsidies to various associations is also under scrutiny.
Verdier-Molinié emphasizes the need for greater transparency in the use of public funds, noting that approximately €23 billion are distributed annually as subsidies and an additional €30 billion on services, such as public childcare and elderly care, provided by these associations.
She calls for accountability since many subsidized organizations do not disclose their financial statements, with just 190 of the 434 state operators providing detailed accounts.
Looking ahead, the potential reforms in unemployment insurance and retirement systems are pivotal in achieving the targets set for both 2026 and 2029. A proposed reform of the unemployment insurance could save between €3 to €4 billion, while changes to retirement policies, such as a gradual increase in the retirement age to 66 by 2033 and partial indexation reforms, could result in €20 billion in savings by 2033, with €5 billion savings anticipated by 2026. One suggested measure for unemployment benefits includes introducing a decreasing scale of allowances after nine months of benefits.
Agnès Verdier-Molinié, an expert from the Fondation IFRAP, has indicated that this objective is achievable through targeted reductions in public spending.
She emphasizes that the achievement of this goal hinges on addressing expenditures at various levels: local governments, the state, and social security.
Verdier-Molinié asserts that local communities account for approximately 20% of public expenditures, suggesting that efficiencies could yield between €7 and €8 billion in savings if these entities aligned their operational expenditures with the national average.
Furthermore, she notes that if local governments were to adopt the spending levels of the least expensive 10% of similar entities, potential savings could rise to €30 billion.
Her analysis highlights significant disparities in fiscal management among local authorities, indicating that some are effectively managed while others are not.
The proposed savings exclude social and investment expenditures.
Turning to state spending, Verdier-Molinié points out that while the state has begun to reduce its budget between 2023 and 2024, expenditures from state operators continue to escalate.
If these expenditures had mirrored those of the state, an additional €800 million could have been saved in 2024. Notably, local public administrations observed a substantial increase in their expenditures, totaling €13.9 billion year-on-year, while social security expenditures surged by €40.3 billion in 2024.
A significant factor contributing to rising costs is the remuneration and staffing levels of public employees.
Verdier-Molinié outlines that aligning personnel costs with average expenditures could yield savings of up to €3 billion, while matching the lowest-spending 10% of local authorities could lead to savings up to €13 billion.
In addressing the 434 state operators, Verdier-Molinié suggests that reviewing their missions could unlock new savings.
She advocates for a strategy that includes the elimination, merging, and privatization of certain entities where duplication of services occurs, particularly among environmental agencies.
This would necessitate a comprehensive evaluation of public organizations and their operational overlaps.
The allocation of subsidies to various associations is also under scrutiny.
Verdier-Molinié emphasizes the need for greater transparency in the use of public funds, noting that approximately €23 billion are distributed annually as subsidies and an additional €30 billion on services, such as public childcare and elderly care, provided by these associations.
She calls for accountability since many subsidized organizations do not disclose their financial statements, with just 190 of the 434 state operators providing detailed accounts.
Looking ahead, the potential reforms in unemployment insurance and retirement systems are pivotal in achieving the targets set for both 2026 and 2029. A proposed reform of the unemployment insurance could save between €3 to €4 billion, while changes to retirement policies, such as a gradual increase in the retirement age to 66 by 2033 and partial indexation reforms, could result in €20 billion in savings by 2033, with €5 billion savings anticipated by 2026. One suggested measure for unemployment benefits includes introducing a decreasing scale of allowances after nine months of benefits.
