Assessing future sustainability of french public finances

Jérôme Creel (1) , Paul Hubert (1) , Francesco Saraceno (1)

1 OFCE - Observatoire français des conjonctures économiques (Sciences Po)

This paper contributes to the debate on the French public finances' consolidation by investigating the long-term sustainability of France's fiscal position. We trace the historical trends of government's tax receipts and expenditures. We find that while the level of public expenditure in France is larger than in the rest of the Euro Area (mostly because of public wages and social benefits), its trend is comparable to its neighbours. Net lending is also under control, thanks to the high levels of taxation, so that we see no real risk of future unsustainability. However, the French tax system is unfair, is not sufficiently progressive, and is too complex. The paper then proceeds to assess the future of France's public finances on the basis of the current debate on the Euro Area fiscal rules. We report two analyses - theoretical and empirical - that project the inflation rate and output gap paths for the next twenty years. We finally assess fiscal rules on this ground. The 'fiscal compact' fares rather poorly compared to the alternative rules that we assess.

Mots clés: deficits; dettes; dettes management; fiscales rule; fiscale compact; golden rule

Domaines: Economies et finances

Jérôme Creel, Paul Hubert, Francesco Saraceno. Assessing future sustainability of french public finances. 2013. ⟨hal-01070452⟩