The aftermath may be worse than elsewhere

It's been years that the Court of Auditors alert Governments on the State of public finances. But this time, "there is urgency" because "The France approach to a very dangerous zone", emphasized yesterday the first President, Philippe Seguin, introducing the report on the "situation and the prospects for public finances". One reason that the France has confronted the crisis in a situation that is already very degraded, with a structural deficit (excluding effects of the environment) estimated at 3.5 of GDP (from 1.4 in the euro area). Then because that the impact of the recession causes a "degradation without precedent", with a deficit that will be greater than 7 of GDP this year and that will still be over 6 of GDP in 2012, even with the return of sustained growth. Above all, the debt will then approach 90 of the GDP, and even 100 in 2018, or even 200 by 2040 if the trend continued! And the first President to refer to the numbers of 1918 (debt to 118 of GDP) and 1945 (170) "indicative of the magnitude of the problem." Other figures shock: by 2012, the interest expense would be above EUR 20 billion of 2008, the equivalent of two points of CSG, revenues from the tax of dwelling or 1.000 euros per employee.

"More expected, more you pay." "There is perhaps not in bankruptcy of the State, but it neglects the consequences concrete and inevitable drift of public finance on the life of the French", says Philippe Séguin, by putting forward a series of risks. First, the concern of economic agents in anticipation of tax increases can trigger a decline in consumption and thus "a vicious circle." Second risk: a depletion of the State leading to a reduction of public services and social protection. Above all, the Court feared an "exponential excitement of debt", loads of interest becoming so important that it must borrow to pay. As "the credibility of the signing of the France" could be "questioned".

"More ambitious reforms".

Philippe Séguin therefore calls for a "drastic effort of reduced spending" of 70 billion euros by 2012 (to remove the structural deficit). "Otherwise, it should resolve to increase compulsory." Increases in levies are to considered inevitable to social security. Court advocates "to go further in the taxation of capital gains from stock" and to submit to assessment severance and departure in retirement. But it is mainly from spending needed "to the much more ambitious reforms" than those incurred in the RGPP. The limitation of the spending by the Government by 2012 would win as a point of GDP. "Did we over at the stage where we can to accommodate ad hoc reforms focused on waste or the most egregious problems", said Philippe Séguin.

Should review the policies of State intervention: solidarity, city and housing, employment, staffing to local communities, etc. On the side of social security, "the raising of the retirement age can not be avoided" (the Court welcomes the advancement to 2010 of the reform), and "the remittance flat system diseases of long duration" (supported in 100 of serious illnesses).

As highly sensitive subjects, but the idea that the France will do better than its neighbors is misleading." "The aftermath may be worse than elsewhere."