The systematic criticism of French successes is unjustified and must be denounced. But this should not prevent us from making a judgement on the current situation, on the mistakes made so far and the risks they represent. The publication of the first estimate of growth in the 1st quarter provides an opportunity to do so. With an increase of 0.1% after a drop of the same amount in the previous quarter, the French economy has been stagnating for six months, but this analysis is misleading.

This modest increase in GDP comes from an increase in inventories held by companies waiting for delivery to customers (+0.5%). It is therefore not the result of goods being sold and paid for, thus contributing to the creation of the country's wealth. Unless, unlikely, these inventories continue to increase in the coming quarters, their reduction will weigh on production in the coming quarters, which, given the very weak growth recorded over the past six months, could lead to a full-blown recession.

This would not be an isolated case in Europe since Germany is in a similar situation, largely due to its past dependence on Russian gas and the weight of its exports of manufactured goods. They are threatened by the customs duties announced in the United States and especially by the rise of Chinese industry, which is becoming a major competitor. But the comparison stops there because the causes of the poor performance of the French economy have more to do with the errors of the economic policy conducted in recent years than with external factors. 

Household consumption stagnated in the 1st quarter, the increase in spending on energy and services was offset by the decline in spending on food and manufactured goods. The latter item is likely indicative of a long-term trend stemming from the aging of the population. From a certain age, you are less tempted to renew your household equipment or your vehicle. Savings figures are not yet available, but it is very likely that the very high level observed in 2024 (18.2% of gross disposable income) will be maintained. But it should mainly concern financial savings because the fall in housing starts continued and household GFCF, which had fallen by 5.7% in 2024, fell again in the 1st quarter (-0.3%).

This increase in financial savings is often attributed to concerns arising from the international situation. The explanation is not enough. It is also the result of the widening of income inequality. The necessary consumption expenses are much lower than the resources of a growing number of households and they have no other solution than to invest their money. Compared to gross disposable income, the rate reached a record high in 2024 (8.8%) and the trend persists with very high levels of deposits in the various savings plans and subscriptions to life insurance programs since the beginning of the year.

Companies have not contributed to growth either, since their investments have not increased, while their financial situation has continued to improve in 2024 with a margin rate of 32.4% and a cash flow rate of 87%. Here again, there is a disconnect between the financial situation of economic agents and their contribution to the growth that should result from it.  The parallel with households is instructive. The enrichment of companies is in fact very unequal and concentrated in large groups, as evidenced by the record dividends distributed and the massive share buybacks carried out.

In addition, the improvement in the financial situation of companies has had no effect on our foreign trade in goods, which has remained heavily in deficit since the beginning of the year. Despite the improvement in the energy balance thanks to the recovery in electricity exports and the fall in oil prices, the monthly deficit remains on average around €7 billion. No improvement has been recorded for manufactured products, whereas the policy pursued for more than ten years was aimed at strengthening their competitiveness and regaining international market share by reducing the burden on companies.

Finally, the consequences on employment are beginning to be felt, since the level of unemployment, once changes in statistical methods have been taken into account, continues to rise. Insufficient domestic demand and the financial strategy of companies do not allow us to be optimistic about its evolution until the end of the year, which will constitute an additional factor in slowing down activity.

The situation of public finances and debt, largely caused by transfers made to companies that past tax increases have not been able to fill, remains worrying and leaves no possibility for the State to take action to support growth in the future. The only good news is that inflation remains very low (0.8% in April over one year in harmonised data), which makes France one of the best pupils in the euro zone. But the maintenance of interest rates by the European Central Bank above 2% penalises the French economy which, unlike Germany, has to suffer from positive real rates, which again is not good for growth.

There is no evidence of an economic recovery since the wealth created is poorly distributed and does not benefit either consumption or investment, and at a time when the State is forced to pursue a restrictive budgetary policy. Political leaders must first abandon the habit that every time a problem arises, new spending must be announced or a public body must be created to solve it. Secondly, the essential effort to reduce deficits must combine simple and indisputable measures with multi-year commitments that make it easier to accept unpopular measures.

The gradual increase in the ceiling for contributions allocated to pensions under the general scheme will make it possible to restore its financial balance without affecting the supplementary schemes whose accumulation of surpluses is unjustified. Similarly, limiting the research tax credit to the productive sectors, based for example on the precise nomenclature established by INSEE, will make it possible to reduce its cost. It does not make sense that it should benefit the Post Office, supermarkets or banks.

There are many ways to reduce expenses or tax benefits. We can also mention the many advantages granted to wind and solar energy or electric vehicles, while France is among the main economies, the one that is the most carbon-free. It is the acceptance of decisions that makes them difficult to implement and it is therefore up to the State to find the right way to adopt the necessary efforts to redress the public accounts without aggravating the pressures on an economy in difficulty, in an unfavourable international environment and suffering from the consequences of past bad choices.

The State no longer has a choice. It is faced with an unprecedented situation: how to support the economy to prevent it from falling into recession while restoring the balance of the public accounts. There is no shortage of solutions, but it is the method that has so far been the main obstacle. The recognition of past mistakes, in which the excesses of supply-side policy feature prominently, provides a first answer. Favouring action, even if it is less visible because it is spaced out in time and more discreet, over communication that allows people to be invited on television sets, is a second response. Otherwise, France will sink into recession, with all its political consequences.