French public debt continues to break historical records: it reached 2,956 billion euros in the third quarter.
Marc Touati, president of the independent economic and financial consulting firm “Aux commandes de l’économie et de la finance” (ACDEFI), is alarmed by the weight of the French debt, which could exceed 3,000 billion euros next year.
Since the beginning of 2020, the public debt has thus exploded by 581.9 billion euros, while GDP has only grown by 161.3 billion euros, including inflation. Since the third quarter of 2017, the large gap between these two variations makes one dizzy: + 685.2 billion euros for the public debt, against + 322.7 billion euros for GDP.
A historical problem
This discrepancy between soaring public debt and weak GDP growth is not new and has only worsened since the late 1990s. For example, at the beginning of 1996, the value of French annual GDP was 1,228 billion euros and the public debt was 703 billion euros, i.e., a gap of 525 billion euros in favor of GDP. This gap was more or less maintained until 2008.
In 2017, the gap became negative, and then stabilized on average around 36 billion euros in favour of GDP until the end of 2019, before returning dramatically to the advantage of the public debt.
France is the only country in the Eurozone to have increased its public debt so much. In recent years, the more France’s weight in the Eurozone‘s public debt increased, the more its weight in GDP decreased. From 2012 to 2022, the former rose from 21% to 24.2%, while the latter fell from 21.3% to 20.3%.
Until a few quarters ago, this surge did not worry us too much, mainly because of the ECB‘s policy of hiding the reality of the cost of the debt. But the time for payment has come. The interest rate on 10-year French government bonds has risen from 0% at the beginning of 2022 to almost 3% since last October. This has led to an increase in the interest burden on the debt of about 120 billion euros over ten years.
France thus has the luxury of being the “world champion” of public debt, excluding the United States, Japan and China. It is thus ahead of Italy (2,800 billion euros), the United Kingdom (2,600 billion euros) and Germany (2,500 billion euros).
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