the essential
In the event of government censorship, Prime Minister Michel Barnier warns of a “financial storm” in France. What do economists Nicolas Bouzou, from the Asterès consulting firm, and Mathieu Plane, from the OFCE analysis and forecasting department, think?
Nicolas Bouzou: “what is happening is extremely serious”
Are the Prime Minister and members of the government dramatizing the situation by promising a financial crisis in the event of a motion of censure?
No, no, I agree with them. And besides, we see that the fear of censorship is starting to generate tensions on the financial markets. What we call the “spread”, that is to say the difference in interest rates, between France and Germany, has been increasing in recent days. It is a good indicator to measure the risk of lending money to France. Worse, since the dissolution, our interest rates have gradually risen above those of Portugal, Spain and, now, Greece. Only Italy pays its debt at a rate higher than ours. So what is happening is extremely serious.
What would happen if, in the event of government censorship, the 2024 budget was extended to 2025?
We would be completely entering the unknown. Because this 2024 budget was extremely lax and deficit. If it were extended for several months, it would therefore further derail finances to absolutely unsustainable proportions. And we would find ourselves at the end of 2025 with a deficit not of 6%, but of at least 7%. So we cannot reassure ourselves, as some parliamentarians do, including Marine Le Pen, by saying that we will only have to postpone the 2024 budget. Because this budget has precisely put us in a clinical situation.
How would the financial markets react?
They could drive up our interest rates. And there, the situation can start to get out of hand, particularly in France. You shouldn't play with that. This is why I say that a certain number of parliamentarians are absolutely irresponsible: what is potentially at the end of the road is indeed a financial crisis, where things spiral out of control and become completely out of control.
Would you vote for the budget presented by the government?
No, because I consider that it includes too many tax increases and not enough spending cuts. But there you go, it’s France, all this was cobbled together in a hurry. On the other hand, I would not vote for censure of the government because it is better to have a bad budget than an overthrown government.
Mathieu Plane: “No one is sure what will happen”
What did you think of Prime Minister Michel Barnier's comments on the possible rejection of the 2025 budget?
I found that he was perhaps forcing the point a little. The situation is unprecedented and, depending on the place we occupy on the political spectrum, we will tend to more or less accentuate its consequences. The truth is that no one is sure what will happen. At present, it is not so much France's poor budgetary situation that is worrying as the political crisis it is going through.
That's to say ?
Well, France's fundamentals are good, there are reserves, abundant savings, an ability to generate a certain growth, very liquid debt on the markets… So we are one of the safe havens for investors. The problem is that we are losing their trust. Because of the lack of political visibility.
Could this lead to a financial crisis?
The word is a bit strong. On the other hand, little by little we ask for a higher risk premium from France, that is possible. So, unlike the government spokesperson, I do not believe in a Greek scenario and the risk of default. I fear an Italian scenario. Italy, because of the fragility of its public finances, pays higher interest rates than others, which costs it dearly and weighs on its growth. To give you an idea, an additional interest rate point costs more than 3 billion euros in the first year and up to 30 billion in the tenth year.
What is your opinion on the budget presented by the government?
It is a program of strong budgetary consolidations to compensate for a sharp drift in public finances. And in particular that of the past year, since we had a slippage of more than 50 billion euros. We are going to be the country in the euro zone with the highest deficit… So we have to do something, find a path to recovery. And I would be rather lenient with regard to the budget presented to us, although it will have negative effects on growth, which the OFCE has estimated at 0.8 points of GDP next year.
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