It was to be expected, and yet, evolution still massive. This Friday, the Insee has unveiled its projections of the evolution of government debt in the first quarter : the least one can say is that the master of the abyssal French debt is not for tomorrow. In the first three months of the year, the French public debt has climbed to “2438,5 billion euros, an increase of 58.4 billion euros“compared to the previous quarter. It is, therefore, increased, as a percentage of 98.1% of GDP, end-2019, 101.2%, an increase of 3.1 percentage points, its “largest increase since the second quarter of 2009“notes Insee. The ceiling of 100% of GDP is, therefore, passed for the fourth time, after the at 100.3% in the third quarter of 2019.
In detail, the three major components of the public debt increase. The debt of the State is growing by 46.4 billion euros, that of the local public authorities of 3.3 billion euros and that of the social security agencies of eur 8.7 billion. The regions and communes have increased their debt for the respective 1 billion and 300 million, respectively, when the departments were refunded “bank loans for € 400 million“says the document. Without surprise, the Insee explains this significant increase in “the lower activity in the first quarter related to the health crisis and the support measures for companies and households“as partial unemployment.
It is important to understand that this rise is still relatively contained, the confinements do not have actually stopped the activity and boosted spending from mid-march, on the end of the quarter. The invoice could therefore be more heavy for the next three months, in the second quarter. In addition, this increase comes after a good year 2019, which were commended to the minds of Bercy. Last year, the debt was stabilized, 98.1% of GDP and had to back up a bit. An evolution that is confirmed “the seriousness of the government’s budget from 2017“if self-congratulait at the time, the ministry of the Economy.
A debt expected to be around 121% of GDP by 2020
This year, the situation is expected to be less pink. The executive has continued to review its copy, as the effects of massive coronavirus on the activity were being seen. While the government forecast in its draft finance act initial on a debt peaking at 98.7% of GDP by 2020, this optimistic estimate has been in decline, with the passing of finance legislation (amendment) law, rising to 102.9% at, 115,2% and approximately 121% in the last text submitted, there are less than ten days. This encryption may change depending on the economic climate, which remains to be scalable and unique.
For its part, the Bank of France forecast in June, a estimate similar. “Due to the widening of the deficit coupled with the decline in GDP, the public debt would increase sharply to 119 % of GDP in 2020, after 98.1 per cent in 2019, and will decline almost at the end of projection horizon“, reported the institution in its latest macroeconomic projection. France would then present a balance sheet which is far superior to the average of the euro area, which is expected to be “101% of GDP by the end of 2020“.
“Not a disaster in itself“
Nonetheless, this debt will be repaid one day. So far, the executive has refused stubbornly to any increase in tax to finance it, explaining that the “a return to growth“will the roll back. “There is a phase where we invest a lot of public investment (sic) […] and we exclude any tax increase to fund this debt“, said Bruno Le Maire, a few days ago.
Last week, the new prime president of the Court of accounts, Pierre Moscovici, was, however, called upon to keep a cool head, and believed that a “debt to 120% of GDP is not in itself a disaster“. The low interest rates allow France to issue debt at low cost, and “when the expenditure is justified by exceptional reasons, economic or social, when it is used well, it is legitimate“, he explained. “ You need to get out of the logic that wants that, systematically, we should propose a reduction of public expenditure“, then added the person who was european commissioner for economic Affairs and minister of the Economy.