Finance minister Gilles Roth (CSV) has succeeded in his first challenge: to ensure that expenditure grows more slowly than revenue. Photo: SIP / Julien Warnand

Finance minister Gilles Roth (CSV) has succeeded in his first challenge: to ensure that expenditure grows more slowly than revenue. Photo: SIP / Julien Warnand

Finance minister Gilles Roth (CSV) on 9 October presented the draft 2025 budget. The budget shows a deficit of €1.29bn. This deficit is €500m less than last year’s projections and €610m less than the 2024 deficit.

The Frieden government’s first budget--a budget that only covered the period April to December 2024 because of the elections--showed a . It’s a deficit assumed by prime minister (CSV) in the name of a policy of recovery. But not without conditions. “I hope that the central government deficit during this legislative period will decrease,” .

Finance minister ’s two main challenges were to reverse the jaws effect that was plaguing public finances--i.e., revenues growing at a slower rate than receipts--and to curb indebtedness. Both challenges have been met on paper.

The end of the jaws effect

The jaws effect seems to be running out of steam if we refer to the figures on the state’s financial situation at 30 September 2024 presented on 8 October by Roth: revenue rose by 14.1% to €21.1bn, while expenditure increased by only 7.4% to €20.7bn compared with the same period in 2023.

In its draft budget for 2025, the government expects this trend to continue. Central government revenue--comprising the administration in the strict sense of the term, local authorities and social security--is expected to rise by 5.2% compared with 2024, to €29.6bn. Central government expenditure is expected to rise by only 4.5% to €30.9bn, leaving a deficit of €1.29bn.

This deficit is expected to persist until 2028. Over the entire period (2024-2028), the general government balance, even if it recovers, will remain negative until 2028, when it should be around -€448m. The municipal sector balance will remain positive until 2028, even improving from +€68m in 2025 to +€234m in 2028. The social security surplus, on the other hand, will fall sharply over the period, from €937m in 2024 to €657m in 2025. The trend is downwards, driven downwards by the high number of retirements and weak growth in employment, analyses Roth.

€3bn in loans to be repaid by 28 April 2025

As for the debt, in 2025 it will remain at the 2024 level, i.e., 27.5% of GDP “before starting a downward trajectory until 2028 at 26%,” explains Roth. As a result, there will be less borrowing over the next few years than was forecast a year ago.

Between now and the end of 2025, the state will still have to repay two loans: on 31 December a bank loan of €1,550,667.92 taken out with Spuerkeess in 2016 and on 28 April 2025 a €1.5bn bond loan taken out on 24 April 2020. The government expects the debt to fall by €1.8bn in 2025, €2bn in 2026 and €2.2bn in 2027.

Conservative economic assumptions

The government has based its budget on the following economic projections for 2025: growth of 2.7%, inflation of 2.6%, employment growth of 0.9% and unemployment of 6%. Conservative assumptions.

MPs have two days to familiarise themselves with the draft in detail. The first committee examinations are scheduled for 11 October. The budget should be voted on in early December.

This article was originally published in .

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