France has ‘worst public finance situation’ in Eurozone due to Covid

It spent €140billion on Covid alone in 2021, the annual public spending report shows, but it acknowledged France’s ‘impressive’ response to the health crisis

View of the Court of Audit -Cour des comptes in French, in Rue Cambon in Paris
The Cour des Comptes is the supreme body for auditing the use of public funds in France
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France spent an “alarming” €140billion on Covid, making its public finance situation the worst in the Eurozone, which will require “unprecedented effort” to redress, public spending auditors have warned.

In its annual report, presented on February 16, La Cour des Comptes said that public spending during the crisis was “of an unprecedented amount” and “this considerable effort will weigh on the deficit and public debt for a long time”.

The Cour’s president Pierre Moscovici said: “The necessary recovery of public finances will inevitably require unprecedented efforts to control our spending.”

La Cour des Comptes is the supreme body for auditing the use of public funds in France, and is independent from the government. It publishes a report each year.

This year, its report focused exclusively on the management of the health crisis, and what it called the “democratic choices” that would need to be made to help the country “hopefully” exit the crisis.

It found that public debt is set to reach €550billion for the period between 2019 and the end of 2022, amounting to 113% of GDP. Some €140billion was spent on Covid measures alone .

The report warns that France “has the worst public finance situation out of the Eurozone countries, two years after the start of the Covid-19 pandemic”.

It said that “despite a robust restart to the economy” – which saw a 7% rise last year, with a further 4% expected this year – “public deficit was very high in 2021 (7% of GDP) and will be in 2022 (5% of GDP)”.

Read more:French economy grew 7% in 2021: fastest rate in 52 years

Despite the warnings, however, Mr Moscovici said that while France “lacked readiness, it was impressive in its reaction” to Covid.

Spending commitments

The Cour also highlighted a number of new permanent spending commitments, including the €10billion Ségur de la santé healthcare reforms, and the drop in production taxes (€10billion).

It also pointed out plans to reduce taxes “significantly” in 2022 (including across measures such as the taxe d'habitation, corporate tax, electricity tax…) and the rise in spending of 1.1% outside of Covid-related bills.

In total, “almost €9billion in extra savings every year” will have to be found, it warned, which would enable the rise in spending between 2023 and 2027 to be limited to just 0.4%.

Such a target would require reform, it adds, including within the retirement system, l’Assurance maladie, employment and housing policy, and social benefits.

Report recommendations

The report made a series of recommendations and suggestions ahead of April’s presidential election.

Address certain ‘whatever it costs’ spending

While Mr Moscovici admitted that this strategy had helped to “save companies and households,” it has still brought public spending up to an unprecedented level.

The body therefore said that it was keen to “correct'' unjustified expenditure, and address the “risk of fraud” inherent in the strategy. More checks and controls are needed, it said, especially for businesses that benefited from state-guaranteed loans.

Read more:Economists heap praise on France for its Covid tactics

Guarantee electricity

As part of its recommendations that France should be prepared in the event of future crises, the country’s electricity supply was considered a top priority.

This was considered especially pertinent now, as electricity and fuel costs soar. The Cour des Comptes has pushed for the development of "load shedding", e.g. the “optimisation of energy consumption during peaks in order to avoid blackouts.

Read more: Regulated prices keep France’s electricity cheaper than EU neighbours

Pension system reform

Mr Moscovici reiterated the importance of pension reform, calling it “essential”. The report in particular addresses “the use of reserves, the safety cushion that allows the system to maintain payments in the event of a difficult context or demographic change”.

The body said it was only “partially satisfied” with the way these reserves were used during Covid, and has recommended the creation of an independent or supervisory body to manage pensions during volatile financial times.

Guarantee medication sourcing

The supply of medicines was an issue during the crisis, it said, as were the disputes over masks. It recommended that France build up larger stocks of crucial medicines, as well as increase production of certain at-risk drugs.

Read more: Cancer in France: 75% of patients affected by medicine shortages

Read more: France requires increased stock of vital medicines to avoid shortages

Improve working-from-home provisions

In anticipation that another similar pandemic-style event could occur, it recommended that working-from-home capacity should be strengthened across businesses.

Administrations should “develop office equipment and collaborative tools”, and digitise certain processes. Video conferencing should also be stepped up, and a good level of IT should be guaranteed to enable working from home to become the norm when necessary.

Integrate care homes into the health system

The elderly have also suffered greatly during the crisis, the Cour said, as it denounced the functioning of numerous care homes for the elderly (Ehpad).

It said many lack their their own coordinating doctors while not having enough access to local doctors from the area and most struggle to recruit enough nurses and auxiliary carers.

The Cour said there needed to be better links between care homes and the rest of the health system. They must not become isolated, but must be part of a wider ensemble, whether by having a formal partnership with a local clinic or hospital, or joining larger groups or via more sharing of staff.

Read more: Inquiries open after claims of food rationing at care homes in France

Vaccinate better in prisons

The ministry of justice also came in for criticism in the report, with the body recommending an improved vaccination strategy in prisons, both for prisoners and for staff. It also recommended stronger links with the health system to better prevent crises in future.

Young people in employment

Mr Moscovici said that “full employment” is possible in France, if young people are targeted. This is the population that is most affected by unemployment.

The body questioned costly schemes already in place, and suggested that resources would be better spent on efforts such as encouraging access to apprenticeships.

Addressing student difficulty

Students have experienced increased financial precarity as a result of Covid, it said, adding that France had “been slow to come to their aid”.

The body said that granting a wider range of scholarships based on social criteria, taking into account the previous year in particular, would allow young people who rely on income from a student job not to be left destitute in the event of a sudden closure of the places that employ them (which was often the case during Covid).

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