France 2022 budget: In search of the optimal deficit

France’s 2022 finance bill attempts to overcome the dual challenge of running a smaller fiscal deficit than in 2021 while maintaining a relatively accommodating fiscal policy. While the underlying assumptions of the budget in terms of growth and the underlying risks seems credible, a few points nevertheless appear less clear at this stage . This is the case of the absence from the draft budget of the “France 2030” investment plan, the skills plan and the “ engagement plan ” to tackle youth unemployment . A deficit of 4.8% of GDP in 2022 remains acceptable in the current environment and in line with the exceptional situation facing European economies . However, the real challenge will be to reduce the structural deficit from 2023 against a regulatory and economic backdrop (monetary policy tightening) that will take shape in 2022 and could be markedly less favourable than today.