In 2022, Macron’s govt spent 58.4% of everything produced by the French
In the UK, the Johnson/Truss/Sunak govt spent (only) 46.9% of everything produced by the British
Montage © Facts4EU.Org 2024
How much closer to Macron’s spending levels will the UK get, under Starmer and Reeves’ budget?
On Thursday last week (24 Oct 2024), the EU Commission produced a wide variety of financial reports including one showing the biggest government spenders in the bloc, as a proportion of GDP. France leads the table. On Friday one of the world's two largest credit rating agencies changed its outlook for France to 'negative'.
The Facts4EU.Org think-tank assesses the numbers and their impact, and asks whether this is a sign of things to come in Starmer's Britain, after Rachel Reeves' budget this Wednesday.
Brexit Facts4EU.Org Summary
Total general government expenditure as % of each EU country’s GDP, 2022 - plus the UK
In 2022 Macron’s government spent nearly 60% of France’s entire economic output on “total general government expenditure” (58.4%). This compares to less than 47% under the former administration of PM’s Johnson, Truss and Sunak in the United Kingdom (46.9%).
- France : 58.4%
- Italy : 54.9%
- Austria : 53.0%
- Greece : 52.9%
- Finland : 52.6%
- Belgium : 52.2%
- EU27 average : 49.2%
- Germany : 49.0%
- Sweden : 48.9%
- Hungary : 48.7%
- Slovenia : 47.7%
- UK : 46.9%
- Spain : 46.4%
- Denmark : 44.9%
- Croatia : 44.9%
- Latvia : 44.2%
- Portugal : 43.9%
- Luxembourg : 43.8%
- Poland : 43.3%
- Netherlands : 43.2%
- Slovakia : 43.0%
- Czechia : 43.0%
- Bulgaria : 41.2%
- Romania : 40.4%
- Estonia : 40.0%
- Cyprus : 37.9%
- Malta : 37.8%
- Lithuania : 36.2%
- Ireland : 20.6%
[Sources: ONS and EU Commission, Oct 2024. Figures are for 2022 as these are the latest available for the UK.]
© Brexit Facts4EU.Org 2024 - click to enlarge
The clear outliers are France and the Republic of Ireland
The French government of Emmanuel Macron takes easily the highest proportion of its economy’s output for government expenditure, at almost 59%.
At the other end of the scale, the Republic of Ireland appears to be the the least profligate. This is a trick of the eye, however, as the RoI has long had the lowest corporate tax rates in the EU, leading to large American corporations such as Google establishing their European ‘headquarters’ there, for tax reasons.
This has of course led to a large and essentially disproportionate tax revenues for the RoI, which pay for that small country’s public services.
Meanwhile, the United Kingdom has a lower general government expenditure rate than either the Eurozone or the EU27 as a whole, at 46.9%, expressed as a fraction of GDP.
France’s credit outlook goes negative
On Friday (25 Oct 2024) Moody's, one of the world’s top two credit ratings agencies, changed its advice on France's outlook from ‘stable’ to ‘negative’.
As if this weren’t enough, Moody’s changed the outlook to from stable to negative for foreign-currency and local-currency long-term issuer ratings on the Société de Prise de Participation de l'Etat (SPPE).
The Moody's credit agency verdict on France, Fri 25 Oct 2024
“The decision to change the outlook to negative from stable reflects the increasing risk that France's government will be unlikely to implement measures that would prevent sustained wider-than-expected budget deficits and a deterioration in debt affordability. The fiscal deterioration that we have already seen is beyond our expectations and stands in contrast with governments in similarly rated countries that are tending to consolidate their public finances in the current environment.
“The risks to France's credit profile are heightened by a political and institutional environment that is not conducive to coalescing on policy measures that will deliver sustained improvements in the budget balance. As a result, budget management is weaker than we had previously assessed.”
“Debt affordability is deteriorating in absolute terms and relative to peers. Beyond the cyclical impact of high interest rates in the euro area, the weakening in France's debt affordability is due to large budget deficits and higher interest rates.”
“The 2024 general government deficit is likely to come in at over 6% of GDP. The government wants to reduce the 2025 deficit to 5% of GDP, but this target is unlikely to be reached due to the scale of fiscal consolidation that it would require.”
“In 2025, while revenue-raising measures are likely to be implemented because they are politically less difficult, France's wide deficits are principally driven by large government expenditure. Across all categories of expenditure, France currently spends more than the euro area average. Large-scale expenditure cuts will be challenging.” “The current political situation for France is unprecedented, and it raises risks about the ability of the institutions to deliver sustained deficit reductions.”
- Moody's, Fri 25 Oct 2024
Observations
As we approach Rachel Reeves’ first-ever budget on Wednesday, the big question will be how much closer she and Sir Keir Starmer will get to the profligate spending levels of the Macron government.
We will know very soon how the Starmer government plans to increase public spending when Rachel Reeves stands up in the House of Commons in two days' time. It seems inevitable that she will take the UK closer to the high-spending excesses of the Macron government.
France's new Prime Minister - Michel Barnier of Brexit infamy - hails from the 'Républicains' party, which managed to secure only 5.4% of the vote in the parliamentary elections this year. He heads a minority coalition government which most French people consider to be temporary, as it consists of many parties which don't like him. He currently survives in office only because the winner of the elections, Marine Le Pen, has chosen not to vote him out. Barnier was effectively a Macron appointee. Now even President Macron appears to be distancing himself from his chosen PM's policies.
To describe this as surreal would, in our view, not be out of place, and yet this is all happening in the EU's No.2 economy.
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[ Sources: EU Commission | The Elysee Palace | ONS | Moody's ] Politicians and journalists can contact us for details, as ever.
Brexit Facts4EU.Org, Mon 28 Oct 2024
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