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Record deficit of €477.3 million to keep national economy afloat
Following a vote by the National Council on the first amended budget for 2020 yesterday evening, Minister of Finance and Economy Jean Castellini spoke to the press about the “exceptional and historic” aspect of adopting this kind of budget in deficit.
“In a country where the norm is to pass balanced budgets, where the last time there was a deficit was back in 2009–2011 following the global financial crisis (€200 million over three years), we are talking here about close to €350 million in excess spending – over three months!” the Minister emphasised.
The record deficit of nearly €500 million is equivalent to a third of the Principality’s total budget and a quarter of the available reserves in the Constitutional Reserve Fund. While the Constitutional Reserve Fund totals €5.5 billion, liquid assets that can be mobilised only amount to a little over €2 billion. It is therefore important to be “cautious and pragmatic in making budgetary choices that will require dipping into this reserve fund, which is an asset that belongs to all Monegasques. It must be managed intelligently, parsimoniously and ethically,” explained Mr Castellini.
The Minister also noted that, over the course of the crisis, “the State has been injecting €75 million every month (one third into business support and two thirds into funding the strengthened provisions for total temporary layoff), as well as up to €50 million in indirect support to companies through state-backed bank loans.”
As a response to this new budget deal, Jean Castellini offered the following options:
- Anticipate new revenue for the State from the digital economy, from the expected strong recovery of the tourism sector, and by boosting the local economy once the recovery begins
- Control expenditure, particularly operating costs. “In line with the announcements made by the Prince’s Palace, the Government will also be contributing to this policy of making savings.”
- Avoid scaling back capital expenditure ambitions
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