With a public deficit exceeding 6% of GDP, France is on the verge of a budgetary abyss. What does a European state look like when it tumbles into the abyss of debt? To know this, you just need to look at Greece, a country now out of the woods after more than ten years of painful efforts.
On October 21, with a simple press release, the rating agency Standard & Poor's announced Greece's exit from its financial purgatory. The country is now placed in the category of “adequate investments” (BBB-/A-3), instead of “speculative” (BB+/B). The reason given: « Significant progress has been made in resolving economic and fiscal imbalances. » With a primary balance (gap in public expenditure and revenue, excluding interest charges) which now stands at 2.1% of GDP, Athens is positioned beyond the ratio stabilizing the debt.
Meanwhile, back home, the news is much less encouraging. At the end of September, three weeks after the appointment of Michel Barnier to Matignon, the interest rate on five-year Treasury bonds (OATs) issued by Paris reached 2.48%, exceeding for the first time times the Greek rate, which stands at 2.4%. It must be said that France's primary balance is negative, showing a deficit of 3.5% of GDP.
How did Greece manage to become a better fiscal student than France? The reasons are not only to be found in our carelessness. For a decade, the Hellenes have been subject to a regime of intense austerity, which is beginning to bear fruit. Gone is the disastrous image of the counterfeiting State! We know that, for years, Athens literally disguised its public accounts (with the help of the Goldman Sachs bank) in order to benefit from the leniency of the European Commission. These illusions allowed it to finance a bloated public sector and to develop a system of social assistance, particularly pensions, which was structurally deficit.
Back to the facts
But on September 15, 2008, the bankruptcy of Lehman Brothers signaled the end of recess. Faced with the global rationing of bank credit caused by the subprime crisis, Greece very quickly found itself unable to borrow at sustainable rates, and had to resolve, less than two years later, to call on the European Union and the IMF to the rescue.
Following a difficult compromise, a rescue plan is decided. It takes place in three stages: first in 2010, aid of 110 billion euros (including 30 lent by the IMF); then in 2012, a new payment of 130 billion euros (including 28 from the IMF); and finally, in 2015, a debt rescheduling. In exchange for this oxygen, the country is placed under supervision for four years. With immense sacrifices required.
275,000 civil servants (30% of the total workforce) were thus dismissed, while those who remained in post saw their salaries drop by around 25%, and their working hours increase from 37.5 to 40 hours per week. The budget of local authorities is cut by 40%; public spending on health and education is reduced by 50% and 22% respectively; the defense budget is reduced by 50%.
Other drastic measures: the VAT rate increases from 5% to 23%, the income tax threshold is lowered from 11,000 to 5,000 euros, the minimum wage is reduced by 22%. A massive privatization program is also being carried out, particularly in the water and electricity sectors. Its most publicized illustration is the purchase of part of the port of Piraeus by a Chinese company in 2016.
A draconian purge
The inventory would not be complete if we did not mention the situation of retirees, whose pensions fall by 15% due to the elimination of 13e et 14e months to which they were entitled until then. The legal retirement age increases from 60 to 67. The civil service regime is aligned with the private sector. Let us add, finally, a real hunt for “undeclared work”, made possible thanks to the accelerated development of card payment terminals.
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The purge is so draconian that some leaders, such as the short-lived Minister of Finance Yanis Varoufakis (January-July 2015), are considering leaving the euro. Finding the drachma would indeed make it possible to significantly devalue and therefore mechanically absorb the debt. But this solution, which would have led Greece into the unknown, was quickly evacuated. The less risky path of the European Union is maintained.
The result is not long in coming. The primary deficit was absorbed in 2013, before turning into a surplus from 2015. However, we must wait another five years for Athens to finally stabilize its debt, the level of which peaked at 207% of GDP in 2020 – it is now below 160%.
The return of youth
Behind the numbers, there are countless individual stories, often painful. Nikos, a Franco-Greek real estate entrepreneur, testifies to the trauma caused by the crisis. “I was almost ruined and had to abandon part of my activities because I could not pay my employeeshe remembers. The country is doing better, but clearly it is no longer the same as before: wages are lower and the social protection system has become a shadow of its former self. »
Tested, Nikos is not defeated. He even displays a certain optimism: “We are moving forwardhe rejoices. A good sign is that we are seeing young people coming back. Many had left to look for work in Western Europe. »
The Greek case can only speak to the French: same tendency towards accelerated spending, same dependence on public borrowing, same belief in the European Santa Claus! With a deficit expected at 6.1% of GDP for the current year and despite a level of compulsory contributions among the highest in the world, our country is at a time of choice. On the brink of collapse, we would do well to reform ourselves before others force us to do so without giving us a voice. In this regard, France undoubtedly has a Greek lesson to learn.
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