France must make "difficult decisions" for the sake of its public finances, warns the IMF

"Difficult decisions" are necessary in France to restore public finances, the International Monetary Fund (IMF) said on Thursday, May 22. The organization warned against excessive tax increases at the expense of reducing public spending.

"Implementing this substantial fiscal consolidation will require decisive action and tough decisions to ensure fairness and justice," the Washington-based institution wrote in a report on French public finances, stressing that "significant additional fiscal efforts will be crucial" in addition to those already implemented.

Without new "significant" measures, the public deficit would remain around 6% of GDP and public debt would increase until 2030, whereas the government has promised to return to European standards by 2029, below a 3% deficit.

To achieve this, the IMF warns against the lever of tax increases , highlighting "France's high level of taxation," "one of the highest in Europe." "A continued recovery in public finances on the scale of the effort planned in France's medium-term plan, which would involve taxation alone, would weigh on business confidence, household consumption and growth potential," warns the IMF, which forecasts only 0.6% growth this year.

Instead, the Fund advises " focusing on rationalising public spending and increasing its efficiency, through concerted action at all levels of public administration : state, social security administrations, local authorities" , in a country which "has the highest ratio of public spending to GDP" in the EU.

Concretely, the IMF recommends a "significant" structural adjustment of 1.1% of GDP in 2026, followed by around 0.9% of GDP per year on average in the medium term , "an adjustment path in line with that planned by the authorities." The IMF considers the plan envisaged by France to be "appropriate" but calls for a project "supported by a well-defined and credible set of measures," noting that it "remains subject to implementation risks."

The French government plans to find €40 billion in savings to meet its 2026 public deficit reduction targets, and intends to present its proposals by July 14, which are expected to combine spending cuts and revenue increases, notably by eliminating certain tax loopholes but without across-the-board tax increases.

He also announced his intention to merge and eliminate several state operators and agencies in order to save money.

"Our current deficit reduction efforts and our economic outlook are credible," Economy Minister Eric Lombard said in a statement sent to AFP in response to the report. Controlling public finances is "our priority and our guiding principle in constructing the 2026 budget," he added.