The French government has regained some fiscal room for manoeuvre, because of a much lower-than-expected 2014 deficit.
The European Commission has also given it an extra two years to bring the deficit below 3% of GDP, which must now happen in 2017 instead of 2015.
However, in return, it wants to see further reforms and additional spending savings, even though existing targets for improving the public finances involve some execution risks.
Currently, France is still running the risk of sanctions for failing to comply with European budget rules. This is why the new stability programme and the national reform programme are so closely watched: they need to be approved by the Commission.
On April 15, France announced an updated stability programme, giving us an opportunity to review the state of the country's public finances. We will carry out a detailed analysis of the new programme in a forthcoming note. This document aims to set the scene and discuss what is happening behind the scenes. There have been many developments since the 2015 budget was presented in October 2014: some positive, others less so. The reason why that the stability programme is attracting so much attention at the moment is that it is the last chance for the government to get its deficit-reduction process back on track to meet European rules and avoid any sanctions. In addition to the recurring question of whether France will hit its stated targets and how, there is, from now on, the question of whether its targets will be approved by the European Commission.
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