Since the pandemic Covid-19 The economies of developed countries have been profoundly disrupted, causing a massive increase in public spending to support businesses and households. This exceptional period forced States to borrow massively, inflating their public debts to historic levels. The accommodative monetary policies of central banks, combined with low interest rates, initially managed this situation. However, the return of inflation has changed the situation, forcing monetary institutions to raise their key rates and mechanically increasing the cost of debt service for States.
A worrying deterioration of the French position
The financial situation of the France now raises serious concerns. On the channel BFM Business, François Villeroy de Galhaugovernor of the Bank of France, sounds the alarm about the deterioration of the French position on the financial markets. The differences in borrowing rates between the France and its European partners have significantly expanded. While in June, France was advantageously positioned with a gap of less than 0.5% compared to Germany, this gap has increased considerably. Even more worrying, the country has been overtaken by Portugal, Spain and even the Greecemarking a notable decline in its financial credibility.
The concrete consequences of the debt burden
The repercussions of this situation are becoming tangible for French public finances. A historic change illustrates the seriousness of the situation: In 2025, for the first time, the cost of debt interest will exceed the National Education budget. This comparison reveals a worrying shift where expenses linked to the past take precedence over investments for the future. There France occupies a unique position within the euro zone, being the only country where the debt/GDP ratio continues to increase, reflecting a growing divergence with its European partners.
An urgent need for recovery
The recent censorship of the budget and the fall of the Barnier government have worsened the financial markets’ perception of French stability. François Villeroy de Galhau underlines the crucial importance of maintaining the deficit reduction objective at 3% by 2029, the threshold necessary to stabilize the evolution of debt in relation to GDP. This target appears all the more essential as the current absence of government and the uncertainty surrounding the 2025 budget weaken the French position. The governor calls for concrete and immediate measures for the recovery of public accounts, considering that any delay would accentuate the country’s vulnerability to the financial markets.
Business
