Since his arrival at Matignon, Michel Barnier has displayed a bad-day outlook. Each time he speaks on the thorny subject of public finances, the register becomes dramatic. As early as September 18, the Prime Minister declared: “The budgetary situation of the country that I discovered is very serious.” Rebelote ten days later, during a speech at the national congress of firefighters.
The head of government knows it, he must give serious guarantees to Brussels and the financial markets. During his general policy statement, he revealed the broad outlines of his plan to straighten out the country’s accounts. The task is difficult: find 60 billion euros to reduce the public deficit to 5% of GDP in 2025. To justify this course of budgetary austerity, the Prime Minister is now waving a red rag: the risk of a financial crisis. “She is in front of us, we must warn her,” warned Michel Barnier on Friday October 4, on the sidelines of a trip to Puy-de-Dôme.
The French case is reminiscent of that of Italy in 2011. At the time, former European Commissioner Mario Monti urgently formed a government and imposed an austerity plan to put the country back on the right path. “I took great care to introduce measures that were unpopular in the eyes of the left, such as pension reform, and others that were very poorly received by the right, such as those on the assets of the richest,” he said, last July, during the Aix-en-Provence Economic Meetings. Certainly, the executive composed of Michel Barnier is not technocratic. However, he must face the same wall of debt. That of France peaks at 112% of GDP – the third highest in the EU – while that of Italy exceeded 120%.
The financial markets have not yet sanctioned France
Similarities therefore exist, but the context is radically different. Firstly because in 2011, the storm first appeared in Greece, before blowing through the rest of the euro zone, hitting Ireland and Portugal in turn, then Cyprus and Italy. and Spain. “The markets had lost money with Greece, there was a contagion phenomenon,” recalls Henri Sterdyniak, economist at the OFCE.
In 2024, like last year, Europe has not experienced any exogenous shocks like those previously experienced with the war in Ukraine or the pandemic. After massively supporting businesses and households during these periods, the French state nevertheless continued to let its deficit and debt slip away. But unlike Italy in 2011, the markets have not yet sanctioned it. Even after the dissolution and the great political uncertainty that followed it.
THE spread of France – the rate gap – with Germany currently hovers around 0.80%, while that of Italy was then flirting with 6%. “Michel Barnier dramatizes the situation. A public debt crisis is not necessarily a financial crisis. The State borrows and can always borrow,” underlines David Cayla, lecturer in economics at the University of Angers.
Everything ultimately depends on the situation in the country concerned. In Japan, for example, public debt exceeds 260% of GDP. A massive drift which did not scare away investors. “What matters is that this debt is sustainable. As long as the country sends the signal that it is capable of honoring its commitments, there is no risk of crisis. There is, however, a pitfall: the repayment of interest is expensive In a country like Italy, this has deprived them of growth, in particular because of the lack of public investment. However, many actors hold public debt, which proves that it is. still a safe haven,” explains Céline Antonin, economist at the OFCE.
The ECB, a major player
Another major difference: the European Central Bank is now clearly identified in the financial landscape. On July 26, 2012, the day before the opening of the London Olympic Games, Mario Draghi, newly appointed president of the monetary institution, gave a landmark speech. A single sentence will be enough to calm the markets’ fears: “The ECB is ready to do whatever it takes to preserve the euro.” “THE “whatever it takes“changed the situation, it was a very militant policy, with this desire not to let down a country in the area,” adds Céline Antonin. This support will be translated into action through quantitative easingthe massive purchase of sovereign debt securities.
The economist Nicolas Dufrêne, director of the Rousseau Institute, wants to be reassuring: “The entire period which has opened since 2015 with the quantitative easing and which grew during the Covid period, demonstrated something absolutely fundamental: a central bank that wants to control rates can do so absolutely without limit. This is the big unthought in this debate around debt”, believes the author of Debt in the 21st century. How to free yourself from it (Odile Jacob). The experts interviewed by L’Express are convinced: if France, the second largest economy in the euro zone, falters, the ECB will not hesitate to intervene. But François Ecalle does not want to come to that. “If we do not want to depend on a decision taken in Frankfurt, we must show that we are capable of controlling the debt and preventing it from spiraling out of control,” believes the former senior official who worked at Bercy.
For Olivier Blanchard, former chief economist of the International Monetary Fund (IMF), “France’s problem is not mainly its level of debt, but the size of its primary deficit [NDLR : hors charges d’intérêt]which ultimately implies an explosion of debt.” According to him, “taking exceptional and temporary measures, such as additional taxation of large companies, is in this context potentially counterproductive. This does not change the outlook for the primary deficit in the long term, once the exceptional measures have expired, and it sends the signal that we are not taking enough lasting measures, while probably not reassuring investors.” In 2011, Italy had been placed under surveillance by the IMF The question arises seriously today for France.
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