Public Debt : How to avoid reaching 100 %
In the European Union, Belgium (103.1%), Portugal (124.8%), Italy (131.2%) and Greece (176.1%) have a debt that exceeds 100% of their GDP.
Over the last few years, thanks to the policy of the European Central Bank (ECB), France enjoys very low interest rates. To the point that the question of the debt is now debated. In this case, why do Switzerland, Germany and Sweden see their public debt decrease through debt braking mechanisms?
The iFRAP Foundation considers that it is essential for France to control its debt, as our room for manoeuvre is becoming increasingly restricted. This relates to the diagnostics of the rating agencies: hence, “if France's rating is downgraded and followed by the financial players, it could obviously have consequences on our financing conditions“.3 The situation is urgent: these agencies consider France as being “very robust from an economic and institutional point of view and has a strong resilience to shock risk”, but it must tackle a public finance situation that seems to be more "problematic".
- France benefits considerably from low interest rates: by keeping rates at their 2010 level, France has saved nearly 19 billion euros between 2010 and 2016; the Government announces that 10 billion will be further saved up to 2021;
- Unfortunately, successive governments have not seized this opportunity to give themselves room for manoeuvre in the event of a new crisis, notably by tackling our recurring deficits and our record level of public spending;
- European rules are a first step in reducing our deficit: other countries, such as Switzerland, Sweden or Germany have gone further by introducing a debt brake;
- The interview with Valérie Plagnol, economist and member of France’s High Council of Public Finances (HCFP);
- The of the iFRAP Foundation’s recommendations.