Go from “whatever it costs” how much does it cost? “. This is the perilous exercise to which the government has engaged, Wednesday, September 14, during the presentation of its energy plan. While the surge in energy prices exerts growing pressure on the purchasing power of the French, the Prime Minister, Elisabeth Borne, tried to send them a double message. The need to moderate budgetary generosity that the State has shown so far, without giving up protecting the most vulnerable households.
From the beginning of 2023, the increase in energy prices will be felt more, even if the essential will continue to be assumed by public spending. After an increase in prices limited to 4 % in 2022, gas and electricity will thus increase by 15 % the following year.
such an increase would have been considered unbearable a few months ago. But the figure must be put into perspective with the reality of market prices, which, according to the government, jumped 120 %. Public aid is all the more important since it is quite unique in Europe. In most of our neighbors, prices increases were much more violent.
France was one of the first countries to deploy a pricing “shield”, before being imitated now by most European countries, which, too, are forced to establish shock absorbers to contain the risks social tensions. In addition to this rate of ceiling on the increase in prices is added a more targeted device, in the form of energy checks which will be sent in early 2023 to the 12 million less favored households.
If these aids should make it possible to approach the difficult winter that is announced, they can only be temporary, given their net cost for public finances, valued at 16 billion euros. The sustainability of the system risks being quickly questioned if tensions on the electricity market were extended beyond the first half of 2023. Hence the need for European reform.
increase in the Debt cost
Furthermore, the tightening of interest rates initiated by the European Central Bank (ECB) began to increase the cost of public debt. This must remain under control. Finally, beyond support for purchasing power, the State must finance other equally crucial projects (education, health, police, justice, reindustrialisation). Without counting, of course, the investments essential to the ecological transition, a major issue. Quickly, budgetary choices will have to impose itself.
The strategy consisting in limiting energy prices has so far allowed France to display one of the lowest inflation rate in Europe, 2 points lower than the average of the euro zone . The budgetary cost is enormous, but it has enabled the country to undergo pressure on wages less than that observed in its neighbors. If prices are staring within reasonable time, the country could come out with reinforced competitiveness. If, on the contrary, inflation continued, France would lose on the two tables, with a digging of the debt, and wages which will sooner or later have to align with the price increase.
The bet is therefore risky, especially with regard to the profile recession. But it would be reductive to see these public expenses only as a cost, they can also be regarded as a budgetary effort which could prove to be paid at the end of the crisis. Only the duration of this will say if the government’s strategy was the right one.