2023-06-30 07:42:00
A symbolic milestone has been reached on France’s public debt. 3,000 billion euros is the highest level of debt in history, reached by the French State in the first quarter of 2023, according to a publication by INSEE, this Friday. The country’s public debt, which amounts to 112.5% of gross domestic product (GDP), once morest 111.8% at the end of December 2022, has increased massively since the health crisis.
In the first quarter, the latter was therefore further increased by 63.4 billion euros to reach 3,013.4 billion in absolute value at the end of March, detailed the National Institute of Statistics. The increase recorded over the first three months of the year is mainly due to the increase in the State debt (+48.6 billion euros), when that of the social security administrations increased by 17.4 billion euros. On the other hand, the debt of miscellaneous central government bodies fell by 2.8 billion euros and that of local public administrations remained almost stable.
Rising interest rates: Emmanuel Macron under debt pressure
The debt to GDP ratio therefore also increased in the first quarter of 2023, when it reached 111.8% (revised upwards) at the end of December 2022. But this amount remains lower than that of 114.8% observed in the first quarter of 2022, thanks to the increase in real GDP due in part to inflation. ” Debts were issued this quarter when they might have been issued the quarter before or following », nuance Sylvain Bersinger, chief economist at Astarès. ” We must not say to ourselves, it’s great consumption is picking up or it’s catastrophic, the debt is increasing “, he summarized. Nevertheless, these new figures confirm that the state of the public accounts is far from the objective set by the European Treaty of Maastricht of 1992.
This provides that the public debt of a Member State must not exceed 60% of its gross domestic product (GDP). In France, this threshold has been largely exceeded for 20 years. But, since the health crisis, followed by the war in Ukraine, this rule, like that of a public deficit below 3% of GDP, has been suspended. They will apply once more in 2024.
Debt level, interest rates, compliance with budgetary rules: understanding everything regarding French public debt
Interest rates at their highest in ten years
If the French governments have followed one another without really worrying regarding France’s public debt, things have changed in 2022. To slow down the economy and curb inflation, the European Central Bank has indeed decided to drastically increase its key rates. The latter, having a direct influence on the rate at which the State borrows money, then went from zero to 3.5%-4% between spring 2022 and summer 2023. They should rise further in the coming months. . The President of the ECB, Christine Lagarde, regularly points out that there is still ” a long way to go before thinking regarding easing monetary policy.
As a result, the ten-year borrowing rates at which France finances itself rose much faster than the government had expected. They exceeded 3% at the end of last year. And even today, they are hovering around 3%. Bercy expects a rate approaching 3.4% in the second part of the year.
« It’s simple: one more point of interest on the French debt, by 2027, it’s fifteen billion euros of additional charge on the public debt explained Bruno Le Maire, the Minister of the Economy in April.
Above all, these new interest rates increase the bill as the old debt – which cost almost nothing – is repaid and replaced by a debt contracted on very onerous terms. According to Maastricht’s accounts, the debt burden should drop from almost 42 billion euros last year to 70 billion by 2027. That is 30 billion euros in additional expenditure for the State.
The government at the foot of the debt wall
The inflationary context, which also increases tax revenues, will not be enough to compensate. Even the savings caused by the very recent pension reform – around 13 billion euros by 2030 – which should come into force, if the timetable is respected, from next September, would be quickly erased.
Faced with ever-increasing pressure from the cost of money since the rise in key rates in 2022, public figures are calling on the State to curb its spending. Last July, the president of the Court of Auditors, Pierre Moscovici, warned of the state of the public debt. “We cannot live under the illusion of free debt”he had warned, making the burden of debt his “main point of concern”. The debt burden refers to all the interest that the State undertakes to pay when it borrows money on the financial markets, in addition to the reimbursement at a specific deadline of the amount borrowed, which is called the ” major “.
Aware of what is considered by some economists and politicians as an emergency, in April the government presented a more ambitious trajectory for the restoration of France’s accounts, which plans to reduce the debt to 108.3% of GDP in 2027 and the deficit at 2.7%, in the European nails, once morest 4.7% in 2022 and 4.9% expected this year.
(with AFP)
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