state of public finances

French public debt exceeds 3,000 billion euros

What does public debt refer to? Public debt includes all the loans that the French State contracts, year after year, to finance its expenses (national education, ecological transition, social benefits, remuneration of civil servants – teachers, nurses, doctors in public hospitals, etc.).

In March 2024, the public debt will amount to 3,159 billion euros, according to the National Institute of Studies and Statistics and Economic Studies (INSEEThis amount represents 110.7% of the gross domestic product (GDP) at the end of the first quarter of 2024.

This debt has been increasing for fifty years, since 1974 to be precise, the year after the first oil shock. 1974 was the last year in which public administrations posted a budget surplus. “, underlines a 2017 Senate information report.

There France is not the only one to hold a public debt greater than 100% of its GDP. It is the third most indebted country in the eurozone (the twenty countries of the European Union (EU) having the euro as their currency), after the Greece and Italy. Outside the EU, in 2021, public debt in UNITED STATES amounted to 128% of GDP, according to data from Eurostat and the International Monetary Fund (IMF) taken from the Bank of France. At Japanit will reach 245% of GDP in 2022, according to the report Japan 2024 OECD. The Japanese archipelago is thus the most indebted country in the world.

France’s budget deficit

One of the consequences of the increase in public debt is the budget deficit. In fact, if during a year, government expenditure is higher than revenue, this results in a budget deficit. A significant deficit appears from the year 1975 […]. Since then, the public balance has remained in deficit despite occasional phases of recovery. “, specifies the Senate in its 2017 report.

In 2023, the budget deficit in France will amount to 173 billion euros, according to the Court of Auditors. It is ” the highest level ever recorded after that of 2020 (178 billion euros), a year marked by the Covid crisis “, analyzes the jurisdiction.

Public deficit exceeds rate authorised by the European Union

Another notable consequence of public debt is the public deficit. While the budget deficit is limited to the State’s revenues and expenditures, the public deficit includes the State’s revenues and expenditures, but also those of social security organizations and local authorities such as regions or departments.

In 2023, France’s public deficit will be €154 billion. That’s 5.5% of GDP. A rate higher than the 3% authorized by the European Union. As a member of the European Union, France must comply with several economic and financial rules. Its public deficit must be less than 3% of GDP and its public debt must not exceed 60% of GDP. Since these two rules were violated in 2023, the European Commission has initiated an excessive deficit procedure against France, and six other EU countries such as Belgium and Italy, in June 2024. In this case, financial sanctions are planned. However, they have never been applied so far.

Faced with the widening public deficit, the Standard and Poor’s agency downgraded France’s sovereign rating on May 31. From AA, it went to AA-. However, French debt continues to attract investors. On July 4, 2024, the Agence France Trésor managed to raise 10.5 billion euros on the financial markets without difficulty, despite the uncertainty linked to the outcome of the legislative elections of this Sunday, July 7. In case of victory, the French Minister of Economy and Finance, Bruno le Maire, promises to reduce the public deficit to 3% of GDP by 2027. We have greatly protected the French economy during the Covid crisis and during inflation, and greatly protected French households. “, he said on June 21.

Read alsoEconomy: what are the consequences for France after the downgrade of its rating by Standard & Poor’s?

Debt burden: more than 50 billion euros in 2024

Who says debt, says loan, says… interest rates. When a person buys an apartment and borrows money from the bank, he must repay this sum that the bank lends him and also pay the interest rates. The same goes for the French State. The more it borrows, the more the amount of all the interest rates increases. This is what we call the debt burden.

Added to this is the rise in interest rates. Today, they are higher than in 2020, for example, which makes it more difficult for French households to buy houses or apartments. This also increases the amount that the French state must allocate from year to year to pay interest rates.

The debt burden is today one of the main items of expenditure of the State, after in particular National Education. In 2024, the debt burden could represent 52.2 billion euros, according to the 2024 finance billIn short, the State would spend 52.2 billion euros just to pay the interest rates on its loans.

Growth, inflation and employment forecasts

According to the Organisation for Economic Co-operation and Development (OECD), real GDP growth is expected to ” to settle at 0.7% in 2024, before rebounding to 1.3% in 2025 ” In France. ” Headline inflation is expected to decline to 2.3% in 2024, then to 2% in 2025 “, the report continues Economic outlook OECD. Annual inflation stood at 4.9% in 2023, after 5.2% in 2022 and 1.6% in 2021, according to INSEE.

As for the unemployment rate, it stands at 7.5% in France (excluding Mayotte) in the first quarter of 2024, according to INSEE. And on average, in the first quarter of 2024, a little over 5.1 million people are registered with France Travail: 2.8 million are unemployed and some 2.3 million people ” exercise reduced activity ” according to France Work.

More than 6,000 billion euros of savings in France

The total savings of the French reached 6,185 billion euros in the last quarter of 2023, according to the latest data from the Banque de France. This sum is equivalent to double the French public debt (3,100 billion euros).

This figure includes all the main financial investments of the French: livrets A, life insurance, stock market shares, etc. Of these more than 6,000 billion euros, 935 billion euros are invested in so-called “regulated” savings. This type of savings includes in particular all livrets A, popular savings accounts (LEP), sustainable and solidarity development accounts (LDDS) and youth accounts.

In May 2024, 389 billion euros were placed in the livret A alone, according to the Banque de France.