France: Entire productivity gains will be used to reduce the fiscal deficit - Natixis

There is currently a heated debate in France on the growth (or the lack of growth) in household purchasing power, but we will probably have to get used to the fact that there will be no growth in household purchasing power for several years, according to Patrick Artus, Research Analyst at Natixis.

Key Quotes

“Productivity gains are small in France, and restoring labour force skills, modernising companies’ capital or reindustrialising takes time.”

“Given the starting point for the French fiscal deficit, the commitments made to reduce the deficit, and the decisions already taken (reduction in many taxes, increase in some types of public spending), the need to reduce the fiscal deficit before 2022 is around 3 percentage points of GDP.”

“The commitments (made to Europe, Germany, etc.) to reduce the fiscal deficit will be met.”

“This means that all of France’s productivity gains will be used, in one way or another, to reduce the fiscal deficit: nothing will be left for productivity gains or to bolster purchasing power.”