What can be done to reduce France’s fiscal deficit?

France’s fiscal deficit was very high in 2023 (5.5% of GDP). What economic policies can be used to reduce this fiscal deficit? France can refrain from reducing it, given that its long-term yield spread against Germany has remained low (below 5 5 basis points), and that this deficit has a positive effect on growth in both the short and long term. The structure of public spending can be changed by increasing the weight of investment, research, education and military spending in total public spending, and by reducing the weight of other spending (welfare transfer payments). The result of this change in the structure of spending will normally be an increase in potential growth, and therefore an improvement in public debt sustainability. The tax burden can be increased, taking care not to increase taxes that have a significant negative effect on employment and competitiveness (social contributions) or on investment (production taxes or taxation of capital income) or on the demand for goods and services (VAT) .