POWER: PGE Begins Gas-Fired Upgrade at Krakow CHP Plant

The French core state budget deficit in the year to September narrowed slightly versus August, as would normally be expected but at least an improvement compared to a rare monthly deficit in Sep 2024. The YTD deficit remains smaller than last year, helped by a further increase in revenues, and remains roughly on track to meet 2025 targets. 

• The YTD general budget deficit narrowed to E155.4bn in September vs E157.5bn August, an improvement of E18.4bn relative to E173.8bn deficit as of Sep 2024.
• The monthly surplus of E2bn for September alone is similar to previous years although compares favourably to a rare deficit of E1.9bn in Sep 2024.
• Revenues accounted for two thirds of the improvement in the YTD deficit vs this time last year, worth E12.6bn at E264bn.
• Tax revenues drove this at E241bn (+13.3bn). “Other tax” revenues were worth an additional E6.2bn, although that’s a similar story to last month – indeed, the Finance Ministry notes it is "mainly due to the gradual increase in excise tariffs on gas and electricity". Income tax (+4.2bn to E53.2bn) and corporate tax (+1.8bn to E42.4bn) also improved relative to a year ago.
• Expenditures meanwhile saw a small decline to E332.7bn vs E335.9bn in Sep 2024 (-3.2bn). The Finance Ministry notes mixed drivers, including increased spending on energy and defence which are offset by "a decrease in payments to several operators and by the elimination of Programme 369, "Amortization of State Debt Related to Covid-19"" (from the 2025 budget law [LDF]).
• Special accounts help round out the relative improvement, with a deficit of E34.3bn some 4.1bn smaller than the E38.4bn up to Sep 2024.
• It leaves a cash deficit running at ~5.2% GDP with some seasonal improvements expected in the three months left in the fiscal year, already comparing favourably to the 5.4% GDP in 2024 as a whole.
• There are complications translating from the above figures on a cash core state deficit to a general government deficit but PM Lecornu forecasts the latter at 5.4% GDP for 2025.
• Of course, greater focus remains on the 2026 budget plan being successfully passed by the 23 December deadline (original submission on 14 October). This plan targets a 4.7% GDP deficit for 2026.
• Despite avoiding censure from the Socialists for now, debates on PM Lecornu's budget continue to face roadblocks after his commitment not to use Article 49.3 (which could force the budget through without a vote). The vote on the revenues section of the plans has been pushed back to 13 November (which would have taken place today). (See yesterday's bullet: [FRANCE] National Assembly Resumes Budget Debate, Time To Pass Ticking Away)