Despite the slippage of the French deficit, no pressure on the monetary markets | EUROtoday

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The French public deficit is slipping, so what? While INSEE revealed on Tuesday March 26 that it had reached 5.5% of gross home product (GDP) in 2023, considerably above the federal government's preliminary forecasts of 4.9%, the monetary markets appear react with a easy shrug of the shoulders. Since October, the rate of interest on ten-year French bonds has even fallen considerably, going from 3.5% to 2.8%. On Tuesday, within the hour following the announcement of the deficit determine, the French charge even fell… very barely, by 0.02 factors.

Read additionally | Article reserved for our subscribers The state of affairs of public funds in France is “worrying”, judges the Court of Auditors

“France currently has no difficulty borrowing money”, recalled Sylvain Bersinger, chief economist at Asterès, an financial consulting agency, in a be aware launched on Thursday March 21. An indication of the unconcerned perspective of buyers, the hole between the charges of France and people of Germany, thought of the nation with the strongest public accounts within the euro zone, is narrowing barely: it has gone from 0 .55 factors on the finish of October 2023 to 0.47 factors at this time.

Why such leniency on the monetary markets? The first reply comes from the state of affairs. During the surge in inflation that adopted the Covid-19 pandemic and the Russian invasion of Ukraine, central banks sharply elevated their key charges, within the hope of stemming the phenomenon.

“Huge excess savings”

Now, as the value rise eases, they’re beginning to reverse course. “Everyone is waiting for interest rate cuts”, remembers Gilles Moëc, chief economist of the Axa group. The European Central Bank indicated {that a} first reduce was probably in June. In the United States, the Federal Reserve follows an analogous timetable.

Furthermore, provides Mr. Moëc, “what really matters is the message and the trajectory”. Clearly, the federal government can reassure the markets if it explains the way it intends to restrict the slippage. The bulletins by the Minister of the Economy, Bruno Le Maire, on instant financial savings measures of 10 billion euros, adopted, in 2025, by 20 billion euros, go on this path. “The markets react when they have the impression that there is no awareness of the problem”believes Mr. Moëc.

A extra structural phenomenon additionally explains the convenience with which France presently funds itself. “There is a huge excess of savings in the world compared to investments”, underlines François Geerolf, economist on the French Observatory of Economic Conditions. On the one hand, the inhabitants is getting older and placing cash apart. On the opposite hand, the European economic system is comparatively stagnant, and it isn’t really easy to seek out initiatives wherein to take a position this cash. Investors due to this fact discover themselves on the head of monumental quantities: “They don’t know the place to place their cash and so they love the general public debt [qui apporte un rendement garanti et presque aucun risque] »continues Mr. Geerolf.

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