The increase in the general government gross debt is mainly due to the State while the public debt of other central government bodies decreased, mainly due to a decrease of €4.5 billion in France’s national state-owned railway company SNCF Réseau’s debt.
The debt of the social security funds kept increasing and that of local governments remained stable, according to INSEE.
The figures come amid increasing concern about whether the new French government is going to find a way to close a gaping hole in the budget as the public deficit is expected to exceed 6% of GDP this year, as well as present long-term solutions to fix its mounting debt.
In twenty years, the French public debt has jumped by more than 2,000 billion euros.
The current 112% is almost double what the Maastricht Treaty requires (the government debt must not exceed 60% of GDP).
However, France’s debt is hair-raising, it is not the highest in the EU, at the end of the first quarter of 2024, Greece recorded 159.8% of its GDP, Italy 137.7%, and France came in third with 110.8%, closely followed by Spain and Belgium.
The lowest debt was recorded in Bulgaria (22.6%), Estonia (23.6%) and Luxembourg (27.2%).
The challenges ahead of the new French government
Prime Minister Michel Barnier’s new minority government is going to present the budget for 2025 next week.
The budget is expected to bring spending cuts and tax rises for wealthy individuals and large corporations.
The new government is facing a parliament divided in three, where the NFP left alliance and far-right National Rally (RN) could join forces and vote out the new cabinet, leaving more uncertainty behind.
Therefore, investor scepticism is growing, despite France being the second-largest economy in the EU.
One of the leading rating agencies, Standard & Poor’s, downgraded France’s creditworthiness at the end of May 2024. This was the first time France’s rating had been lowered since 2013.
Just this week, France’s 10-year-old bonds were briefly priced as a riskier investment than Spain’s. This means that the country has to pay an increasing amount to refinance its debt.
As for French five-year bonds, the interest rate on them surpassed that of Greece’s on Friday.
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Publish date : 2024-09-27 07:13:00
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