COST OF COVID

Covid crisis pushes French budget deficit 47 billion euros further into the red

Olivier Dussopt, French Public Accounts Minister.
Olivier Dussopt, French Public Accounts Minister. AFP/Ludovic Marin

France's budget deficit for 2021 will stand at 220 billion euros, some 47 billion higher than previously estimated, Olivier Dussopt, the Public Accounts Minister, has admitted. The 2020 deficit was already at an all-time high.

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The budget deficit is the gap between what the government takes in in terms of taxation, and what it spends to keep the country going.

The likely figures are presented to parliament, debated, and go on to form the finance law for the following 12 months.

The increase this year, more than 20 percent the original estimation, is a direct result of measures that the government is continuing to take to support recovery from the devastating effects that Covid-19 shutdowns have wreaked on the eurozone's second-largest economy, the minister said.

The government will now be obliged to present a bill of rectification to parliament next week, in order to get approval for the extra emergency spending.

It is not yet clear how the revised numbers will affect the budget deficit when expressed as percentage of Gross Domestic Product (GDP, a measure of the wealth of the French economy), which was previously forecast to hit 9 percent this year, a postwar record.

Public debt was previously forecast as reaching 118 percent of GDP.

Half a trillion euros over three years

The Covid-19 pandemic is expected to cost the French state nearly half a trillion euros over three years -- 158 billion euros in 2020, a projected 171 billion euros in 2021, and a further 96 billion euros in 2022, Dussopt said in April.

France has borrowed heavily in efforts to keep the economy afloat through three nationwide lockdowns.

The borrowings have been used to compensate people made temporarily redundant and to aid companies struggling to stay afloat during the crisis.

The slow growth rate of the French economy is not helping matters.

The government was hoping for 0.4 percent in the crisis-ravaged first quarter. Real growth stayed at 0.1 percent.

Things have certainly improved in the second three months, but it is not yet clear that the government objective of 5 percent growth for the year will be met.

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