Macron's France within the whirlwind of rates of interest | EUROtoday

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Two of the three most influential score companies on monetary markets, Fitch Ratings and Moody's, up to date their evaluation of the solvency of French public debt on April 26. This evaluate of France's monetary score takes place each six months. More concern than hurt: France escaped a sanction and the 2 companies stored their rankings, in addition to their outlook, unchanged. Standard & Poor's (S&P), thought of essentially the most influential company of all, will ship its verdict on Friday May 31. Before this deadline, “ Point ” offers you a series in five episodes to understand everything about the financial situation in France.

EEmmanuel Macron assures us. “There is no slippage in state spending,” he said in an interview with The Express, Wednesday 22 May. So why did the public deficit reach 5.5% of GDP in 2023, when the government anticipated 4.9%? This is because of “the two major crises which have impacted our public finances: Covid, with “whatever it takes” […] and the war in Ukraine and its consequences on energy prices,” justifies the head of state.

Although successive crises have of course increased the public deficit, the problem actually goes back much further. “The last public surplus dates from 1974! We have permanent deficits,” recalls economist Marc Touati. And the Macron presidency has not improved the situation, quite the contrary. Since the start of his first five-year term, the Head of State will have given France 821 billion euros in additional debt. According to forecasts made by the Molinari Institute for Pointit will reach 1,000 billion between January 2025 and January 2027.

A very French habit. “We are constantly in a policy that postpones the problems of cleaning up public accounts until tomorrow. Every time there is a crisis, the only solution is to free up credit,” explained economist Philippe Dessertine in an interview with Point, March 22. “For years, French leaders kept believing that the debt cost nothing,” says Marc Touati, president of the Acdefi firm (At the helm of the economy and finance). Problem: this is not the case. As for individuals, government loans are subject to interest rates. France is no exception.

Rising rates

After years of very low, even negative, interest rates – investors were paying to finance France's debt! –, key rates reached up to 4% in 2023. Result: the debt burden, i.e. the interest paid to finance it, has increased considerably. “Next year, the debt burden will reach 75 billion euros, it will be the main expenditure item for the State. So the argument that debt costs nothing is false,” says Marc Touati.

For its part, Bercy, always optimistic, estimates that this charge will reach 72.3 billion euros in 2027. One certainty: for 2023, this interest amounts to 50 billion, according to Fipeco. “It’s already one of the biggest state budgets,” points out Marc Touati.

For comparison, the budget allocated to Defense in 2023 is 43.9 billion euros and that of Ecology 35.7 billion euros, according to the finance bill. According to the figures – probably optimistic – contained in the stability program presented by Bercy, the debt burden will reach 54 billion in 2025, 62 billion in 2026 and 72 billion in 2027.

“This is money that is not used in the social sector or in hospitals or others,” insists economist Marc Touati, “this creates a pernicious circle of debt: you have to go into debt just to repay your interest . » With, ultimately, an inability to invest in the issues of our time. “At the European level, we must invest in view of the American or Chinese situation with public support for their economy,” estimates OFCE economist Mathieu Plane.

3,101.2 billion
This is the quantity of French public debt in euros on the finish of 2023.