War in the Middle East: Sébastien Lecornu warns about the state of public finances and plans to review planned savings

An “update” envisaged by the Prime Minister. This Tuesday, May 19, during a session at the National Assembly, Sébastien Lecornu indicated that he planned to review the six billion euros of freezes and cancellations of credits planned to compensate for the “impact” of the war in the Middle East on public finances.

“It’s a war and I think that the 6 billion euros that we have documented will have to be updated, obviously, in the times to come,” he declared in the hemicycle after a question from the leader of the Horizons deputies, Laurent Marcangeli.

At Matignon, we explain that this “update” does not necessarily mean an increase in the amount of these gels but a different distribution. Sébastien Lecornu is due to hold a press conference on Thursday May 21 on the economic consequences of this conflict, which is causing fuel prices to soar at the pump and increasing costs in several sectors of activity. On this occasion, he will present a “new package” of aid for the month of June intended for the most affected sectors, such as agriculture, fishing and construction.

The need to “change scale”

To offset the cost of this war, the government announced in mid-April that six billion euros in savings on spending could be made in 2026, in the form of credit freezes or “targeted cancellations”. The effort would cost the State four billion euros and two billion euros in “the social sphere.”

The Prime Minister estimated that “unfortunately, this geopolitics has settled in the reservoir of the French (…) and, we see it, in one form or another, it will last”, evoking the “crisis of imported inflation on energy”. Forced to budgetary discipline and threatened by a recession, the government has been procrastinating since the start of the war at the end of February on aid that it always wants to be “targeted” and not general, ruling out any reduction in taxation.

Sébastien Lecornu recognized, however, that the crisis was dragging on and that in this context it was necessary to “change scale”, promising not to abandon “anyone”. “From the start, my obsession, that of the government, has been to ensure that entire sections of the country’s economic activity do not come to a standstill,” he insisted on Tuesday.

But he also wanted to rule out windfall effects. “Certain sectors must not take advantage, precisely, to exploit this inflation. Today, we must only see inflation on these costs derived from oil products and not anything else,” he said. In this regard, he tasked the Minister of SMEs Serge Papin with “clarifying all the price impacts on the sectors and construction”. He also asked Roland Lescure, Minister of the Economy, and Sébastien Martin, Minister of Industry, to make him “proposals” for the chemistry sector, “very highly exposed” to this crisis.