Bad news which is confirmed for Bercy. The surge in interest rates on the markets has had an impact on the repayment of France’s debt in 2023, with an average interest rate at the highest since 2008 and the great financial crisis.
On average, and for all borrowing periods combined, France borrowed in 2023 at 3.15%, said Agence France Trésor (AFT), the organization attached to the Ministry of the Economy and responsible for placing the debt. of France on the financial markets. This is a much higher average than in 2022 (+ 1.04%) and than in 2021, where it was even negative (-0.28%).
The cost of debt on the rise
In June, France’s total debts exceeded 3,000 billion euros, or nearly 110% of gross domestic product (GDP). A first. Consequently, the debt burden, which represents the interest that France must pay each year for its various loans, has increased significantly over the past two years. In the presentation of the 2024 budget of the Ministry of the Economy and Finance, it represented 51.7 billion euros in 2023… But is expected to increase by 61 billion by 2026.
The rise in government interest rates is the consequence of the policy of the European Central Bank, which has massively raised its key rates since July 2022 in order to fight inflation. This movement had repercussions on other interest rates in the economy, including government borrowing rates.
But for the past month, many market participants have been convinced that central banks will lower their key rates in the first months of 2024, which would allow the interest rates of states like France to fall.
In 2008, the interest rate averaged 3.88%. Following the financial crisis, central banks began to initiate a process of lowering their key interest rates, in order to support the economy and the markets. This movement then had repercussions on other interest rates in the economy, including government borrowing rates.