Thursday, 27 Feb 2020

France sinks deeper into debt

PARIS (AFP) – France’s has slipped further into the red, the national statistics bureau said on Friday (June 28), only days after the country’s public auditor warned of “worrying” debt levels.

Public debt rose to 99.6 per cent of gross domestic product (GDP) in the first quarter of the year, the Insee bureau said, widening the gulf between the eurozone’s 60 per cent of GDP debt limit and the French reality.

France is now €43.6 billion (S$67.2 billion) deeper in hock than at the end of 2018, when the debt to GDP ratio stood at 98.4 per cent.

President Emmanual Macron’s government is targeting a ratio of 98.9 per cent for the end of this year.

Insee said the rise in the public sector debt was mostly due to central government spending, with local authorities and the social security system adding much less to the debt mountain.

On Tuesday (June 25), France’s public auditor warned that the country’s debt level was “worrying” and urged the government to control spending.

France has been bucking the downward debt trend seen in most other eurozone countries after Mr Macron loosened the country’s purse strings to try end months of often violent “yellow vest” protests.

In a report, the Cour des Comptes said the growing divergence between France and its neighbours on debt reduction “could lead to a deterioration of the perceived quality of France’s debt among investors”.

It chided the government over its failure to take advantage of a spell of growth to significantly rein in overspending, which leads to increased borrowing every year.

The International Monetary Fund also warned last month that France’s debt was “too high for comfort” and called on the government to cut spending.

Neighbour Italy is in the crosshairs of the EU Commission which has put Rome on notice about its snowballing debt, as well as its deteriorating deficit position, reopening a political battle with Rome.

Italy’s debt ratio is, at 132 per cent of GDP, much higher than that of France and the second-biggest in the eurozone after Greece.

Germany, the eurozone’s biggest economy ahead of France, had a ratio of just over 60 per cent at the end of last year.

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