In “La Tribune du dimanche”, Prime Minister Michel Barnier confirmed that the 2025 budget will be austere. He plans to make savings of 40 billion euros and raise taxes by 20 billion euros.
The plan is to cut government spending by 20 billion euros, notably by not adjusting appropriations in line with inflation. A third of this 40 billion will be financed by savings in social spending. Reductions in social security contributions and taxes benefiting companies will be reviewed, with the aim of saving 4 billion euros.
The first shock will be felt by retired. According to Michel Barnier, this will result in savings of 4 billion euros.

Reducing social spending

This reduction in public aid is a cause for concern. Région Réunion has voiced its fears about the sustainability of the social security contribution exemptions from which many La Réunion companies benefit.
The projected 200 million euro reduction in the budget of the Ministry for Overseas France is a symbolic figure. It could be accompanied by a cut in the single budget line (LBU) which finances the construction and renovation of social housing on La Reunion Island.
The announced cut in social spending is also of the utmost concern, as Réunion has over 170,000 jobseekers and almost 40% of its inhabitants below the poverty line. These social expenses enable many people to survive on our island.
As an integral part of the Republic, La Réunion Island will be affected by these measures unless the MPs and senators succeed in obtaining exemptions. These announcements come against a backdrop that is hardly favorable for La Réunion’s economy.

294,000 employees and over 170,000 jobseekers

The economic outlook for La Reunion Island published last Friday by INSEE (the French National Institute for Statistics and Economic Studies) stresses that job creation in both the public and private sectors is “sluggish”.
In the second quarter of 2024, Réunion had 293,900 employees, including 125,100 in non-market services, i.e. education, public administration and health or social action, 75% of whom worked in the public sector. These figures should be compared with the number of jobseekers registered with France Travail: over 170,000.
Private-sector employment remained stable this quarter, after several periods of slowing job creation. In the previous quarter, 500 jobs were created, with an average of 700 additional jobs per quarter in 2023. On the public-sector side, the situation is also unchanged in Q2, following an increase of 800 jobs in the previous quarter and an average increase of 300 jobs per quarter in 2023. Non-market subsidized “Parcours emploi compétences” (PEC) contracts have remained constant over the past 12 months: at the end of June 2024, 10,000 people were benefiting from this type of contract.
The INSEE report notes the loss of 500 jobs in the building and civil engineering sector, whereas by 2023, “400 jobs had been destroyed”. Over one year, the 5% drop is three times greater than in France. Companies with fewer than 10 employees are the hardest hit. They account for 40% of employment in this sector.
700 jobs were also lost in the temporary employment sector over the year. This 14% drop is two and a half times greater than in France as a whole.

3,700 jobs created in 2023 compared 5,800 in 2022

Last Friday’s presentation of INSEE’s “economic outlook” also featured the latest publication of the “Comptes économiques rapides pour l’Outre-mer” (CEROM). The result of work by INSEE, AFD and IEDOM, this study shows that by 2023, La Réunion’s growth will be lower than it was before the health crisis. This is reflected in employment, with 3,700 jobs created in 2023, compared with 5,800 in 2022 and 14,000 in 2021.
Any reduction in government funding for La Reunion Island will mean less money for our economy, which is in desperate need of it. After all, it’s consumption that drives growth in La Réunion, not the production of goods and services. This consumption is notably financed by public transfers from France.

M.M.