It is an institution that is as unknown as it is wealthy, and which says a lot about the active role of the French state in the economy: the Caisse des Dépôts et Consignations (CDC). With a balance sheet total of around 1,300 billion euros – almost half of French GDP – this public investment bank is at the heart of French society. CDC, more than 200 years old, has a majority stake in the French Post, participates in public transport and energy companies, finances social housing and supports the countryside.
And the bank is making a profit – almost 4 billion euros in 2023. This is partly thanks to the “rigorous leadership” of the bank’s recently departed director, Éric Lombard, writes the newspaper Le Parisien.
Lombard (66) was appointed Minister of Economy and Finance by President Emmanuel Macron on Monday. Lombard’s good numbers and familiarity with public expenditure will come in handy: it is up to him to prepare a new French government budget for 2025, amid ongoing political chaos in Paris.
The previous French government, of conservative Prime Minister Michel Barnier, fell in the middle of this month. The heavily fragmented French parliament rejected Barnier’s budget, which included 60 billion in tax increases and cuts. His successor is the centrist politician François Bayrou. Like Barnier, Bayrou does not have a majority in parliament, in which the left and the radical right form the largest political blocs.
Because a budget for 2025 was not finalized before New Year’s Eve, an emergency law is in force. This means that the 2024 budget is temporarily copied to the following year. This also means that the French budget deficit of more than 6 percent – twice the EU maximum standard – will not decrease for the time being.
The new government must quickly come up with another budget proposal early next year. Bayrou is aiming for a budget deficit of “about 5 percent, just over 5 percent” in 2025, he said on Monday.
The new Minister of Finance Lombard spoke of the deficit as “our endemic evil”with ‘consequences for the national debt’. That national debt has exploded, from less than 100 percent before the pandemic to 113 percent in 2024 (well above the EU ceiling of 60 percent). The European Commission expects the French debt to increase further to 117 percent in the coming years.
“We must reduce the deficit without killing economic growth,” Lombard said on Monday upon taking up his post, according to news agencies. Unlike the German economy, the French economy is still growing, although the expected GDP growth in 2025 is very limited. No more than 0.8 percent, the European Commission thinks.
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Lombard had a career that is often seen in French politics: he moved back and forth between the financial sector and politics.
In the 1980s and 1990s he worked as an advisor to various socialist ministers. A banker “from the left,” mentions the newspaper Le Monde it. He worked for the bank BNP Paribas for a long time – including on September 11, 2001, when he had to close a deal in New York on the takeover of an American bank. Due to an agenda conflict on the American side, he narrowly avoided that day’s attack.
President Macron will recognize Lombard’s career: in the past he worked for years as a banker at Rothschild and belonged to the Parti Socialiste for several years.
Lombard’s political signature can help Prime Minister Bayrou build a bridge to the left in the French parliament – something Barnier was unable to do. The big challenge: distributing the cuts and tax increases that will be necessary between citizens and companies in a politically acceptable way. Bayrou said this week that companies should not be hit too hard with additional burdens. Businesses are a “national treasure” that provides “prosperity and jobs,” he said.
The political problems surrounding the budget are already taking a toll on the French economy. Credit rating agency Moody’s downgraded the French government’s score in the middle of this month (from score ‘Aa2’ to ‘Aa3’). This has directly led to a reduction in the credit score of seven French banks, ING writes in an analysis. The likely consequence: higher interest rates for French citizens and companies, the bank said.
Due to the continued uncertainty about the new budget, ING writes, companies and consumers are postponing purchasing and investment decisions. Economic confidence is suffering. There is work to be done for Bayrou and Lombard.
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