France: How can the necessary reduction in public spending be achieved without reducing growth?
Given the outlook for growth , tax cuts and increases that have been announced in some areas of public spending , France is going to have to reduc e its public spending significantly between 2019 and 2022 if it is to meet its budgetary commitments . How can the necessary reduction in public spending be achieved without reducing growth in France? There would have to be “Ricardian neutralityâ€, i.e. the reduction in public spending would have to lead to an increase in private spending (to a fall in the private sector savings rate). This would probably be the case, for example, in the event of: An increase in the retirement age, as a reduction in the duration of retirement enables workers to save less; A transfer of some public services to the private sector. This would give rise to new private consumption of education and healthcare, replacing the previous public spending.