FRANCE: 2024 Budget Deficit At 5.8%, Broadly In Line With Budg. Min Guidance
France posted a budget deficit worth of 5.8% GDP in 2024, three tenths below the Finance Ministry’s latest projections. However, we note that Budget Minister Montchalin had suggested the deficit could come in “a little bit lower” than 6% in comments last week. Nonetheless, the figure will provide some temporary reprieve for markets, with France still facing medium-term fiscal and political risks.
- Expenditures totalled 57.1% of GDP in 2024 (vs 56.9% in 2023, 58.4% in 2022), while revenues totalled 51.3% (vs 51.5% in 2023, 53.7% in 2022). Interest costs accounted for 2.0% of GDP.
- The debt to GDP ratio increased to 113.0% in 2024, from 109.8% in 2023 and 111.4% in 2022.
- The Government expects the deficit to shrink to 5.4% of GDP in 2025.
- While near-term French political risks have abated in recent weeks (superseded by US tariff concerns and German fiscal developments), it’s worth remembering that the Bayrou administration is held up by a weak understanding between Parties across the political spectrum.
- At the start of this month, Fitch highlighted that ongoing negotiations around pension reform (which was an important concession made by PM Bayrou in trying to gain support from the Socialist party) presents a key risk to the outlook: "If the government dilutes the 2023 pension reforms significantly, this could create downward pressure on the ratings by increasing imbalances in France's social security system, a key component of general government finances".
- The prospect of increased French defence spending – and crucially how to fund such increases – presents another risk to monitor on the fiscal side.
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MNI: GERMAN Q4 FINAL GDP -0.2% Q/Q, -0.2% Y/Y
- MNI: GERMAN Q4 FINAL GDP -0.2% Q/Q, -0.2% Y/Y
EURJPY TECHS: Support Remains Exposed
- RES 4: 161.35 61.8% retracement of the Dec 30 - Feb 10 bear leg
- RES 3: 161.19 High Feb 13
- RES 2: 160.23 50-day EMA and key short-term resistance
- RES 1: 158.82 20-day EMA
- PRICE: 156.71 @ 07:06 GMT Feb 25
- SUP 1: 155.82/155.61 Low Feb 21 / 10 and the bear trigger
- SUP 2: 155.15 Low Sep 16 ‘24
- SUP 3: 154.42 Low Aug 5 ‘24 and key medium-term support
- SUP 4: 153.87 Low Dec 14 ‘23
EURJPY maintains a softer tone for now. Attention is on key short-term support at 155.61, the Feb 10 low. Clearance of this level would highlight an important bearish break and set the scene for an extension towards 155.15, the Sep 16 ‘24 low, and 154.42, the Aug 5 ‘24 low and a key medium-term bear trigger. Initial firm resistance to watch is unchanged at 158.82, the 20-day EMA. Key resistance is 160.23, the 50-day EMA.
BTP TECHS: (H5) Structure Appears Bullish
- RES 4: 122.85 High Dec 12
- RES 3: 121.88 76.4% retracement of the Dec 11 - Jan 13 bear leg
- RES 2: 120.98/121.00 61.8% of Dec 11 - Jan 13 bear leg / High Feb 7
- RES 1: 120.47 High Feb 13
- PRICE: 119.88 @ Close Feb 24
- SUP 1: 118.95 Low Feb 19
- SUP 2: 118.65/117.16 Low Jan 24 / 13 and the bear trigger
- SUP 3: 116.59 76.4% retrace of the Jun - Dec ‘24 bull cycle (cont)
- SUP 4: 116.07 Low Jul 8 ‘24 (cont)
A bullish cycle in BTP futures remains intact and the latest pullback appears corrective - for now. A stronger reversal higher would refocus attention on 120.98 (recently pierced) and 121.88, Fibonacci retracement points. On the downside, initial key support to watch lies at 118.65, the Jan 24 low. Clearance of this price point would instead highlight a reversal and the end of the corrective bull cycle. First support lies at 118.95, the Feb 19 low.
