The greatest return of budget austerity?

Calls for better control of public finances are coming everywhere, from the IMF, to economists, to business circles concerned about the long-term impact of government deficit budgets. This escalating movement is raising further concerns about the consequences for the financing of public services.

Many countries face high public debt and large budget deficitsThe International Monetary Fund wrote last April. We urge governments to avoid budget blunders and allocate more time to rebuild room for maneuver and preserve government fiscal viability in the medium term. Added company.

According to IMF70% of member states tightened their fiscal policy in 2022, but this rate drops to 50% in 2023. The organization highlighted that many countries are struggling to completely undo the economic policies adopted in response to the pandemic. And rising rates in 2022 and 2023 further increase interest costs.

Thus, in 2023, global public debt will rise to 93% GDP. Before the pandemic, the rate was 84%. Most of this growth comes from the United States and China.

The IMF As a record number of countries plan elections this year, the global financial situation is feared to worsen. More than half of the world's population is invited and invited to the polls. However, according to IMF, There is evidence that states spend more and cut taxes during election years.

Spending pressure to deal with structural problems, especially demographic and environmental transitions, IMFare intensifying, but slowing growth prospects and persistently high interest rates risk further restricting fiscal space in many countries.

The IMF It proposes to completely end the budget measures adopted during the pandemic, limit spending growth while protecting the most disadvantaged, and raise corporate taxes on deemed excessive profits.

What's going on in Ottawa?

This call from IMF In France in particular, the deficit reached 5.6% GDP This year and next will rise to 6.2%, according to French government estimates, levels significantly higher than the maximum target set by the European Union in principle, i.e. 3%.

At home, federal Finance Minister Chrystia Freeland's intentions regarding budget trends in the coming months are difficult to decipher. Great political uncertainty regarding the survival of the government is confusing the nature of the budget.

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The latest news is that the Trudeau government has projected a $40 billion or 1.4% deficit this year. GDP. However, the Parliamentary Budget Officer recently estimated that the deficit could eventually reach $46 billion. Ottawa will have to consider its finances during the fiscal and budgetary update in November.

Economists and business community representatives believe the Trudeau government needs to rectify the situation to return to a balanced budget after years of heavy spending. Debt rose from $687 billion in 2015 to $1,215 billion as of March 31, or from 31% to 42.1% of debt. GDP. Net debt excluding non-financial assets stood at $1,328 billion.

Austerity in Quebec?

Meanwhile, in Quebec, the Legault government denied being on austerity. However, Treasury Board President Sonia Lebel and Finance Minister Eric Girard are urging departments to respect the envelopes provided in the last budget, which would require some adjustments and postponement of some projects.

Quebec wants to reduce growth in spending, which many see as budget cuts. The opposition says that the government has initiated austerity measures. It should be said that Prime Minister Legault and Finance Minister Girard have already indicated that a return to a balanced budget is a priority.

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At the same time, in the CAQ government software, the reduction of tax burdens is at the top of priorities. In 2026, an election year, the government still hopes to promise tax cuts, tariffs or charges. But it will be difficult to do without further burdening the public finances.

This is where budget austerity comes into play in Quebec. Legault government announces largest deficit in Quebec history for 2024-25 – $11 billion or 1.9% for 2024-25 GDP –, seeks solutions to reduce all cost increases to create maneuver for next election promises.

Economic circles support this vision, and the message is undoubtedly well-received in the office of Minister Eric Girard, an economist and former banker.

A certain budget discipline

has Economy zone On Thursday evening, Guy Cormier, CEO of Desjardins, made a strong plea in favor of better control of public finances. We need to restore a certain budgetary disciplineHe said, referring to the situation in Quebec and Ottawa. When I look at the housing crisis, climate change, the importance of supporting our youth, health and education issues, the next generation will have to pay for this.

Therefore according to him, there is a need to resolve, A bit stricter on everything related to budget balance [et] Make choices today that will not reach people in 2030, 2035, 2040.

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Regardless of the government, Liberals, Conservatives, regional governments, we need to improve the country's economic performance, the implementation of measures – simplifying regulations, improving the productivity of our businesses, encouraging economic activity – certainly improving state income and perhaps less reducing services.

At the same time, the Quebec government is under major financial pressures – in health, education, transport – to deal with climate change. And the underfunding of infrastructure, highlighted again by Montreal's mayor Friday morning after closing three Montreal metro stations, is forcing the state to review its priorities.

In a report published by CIRANO in 2023, a group of researchers confirmed that the deficit in asset management in Quebec is constantly increasing. The deficit is projected to be $31 billion by March 31, 2023.

The state therefore has to struggle between, on the one hand, growing financial pressures and, on the other, the viability of the government's economy. Between these two imperatives, citizens expect more efficient public services, a health system that is reassuring rather than anxiety-provoking, healthy and inspiring schools for young people, and real solutions to confront the climate challenge. Very challenging.