France’s Debt Climbs To Highest Since 1995

France’s debt mountain is growing and will this year be at its highest level since 1995 because of a soaring deficit, the country’s finance ministry said Saturday.

A ministry source told reporters the public debt will reach 119.3 per cent of GDP in 2026 and 121.7 per cent in 2027 — double the 60-per cent-of-GDP reference limit EU member countries are required to aim for.

Those debt figures will set records since the state statistics agency INSEE started recording debt levels under the current methodology in late 1995.

The source said the rise in France’s debt was “automatic” as “a consequence of a deficit that remains high”.

Under EU rules, the public deficit — the annual shortfall of revenue to spending — is meant to be no more than three percent of GDP.

But last year, it came in at 5.1 percent of GDP, and the government forecasts it will hit 5.4 percent this year.

France, which has been under special EU monitoring for the past two years because of those high figures, expects its deficit to drop to five percent next year — when it holds elections to choose its next president and government.

The government has submitted its draft 2027 budget measures to an independent fiscal watchdog, the High Council of Public Finances, to evaluate their viability in macroeconomic terms.

Prime Minister Sebastian Lecornu said on Thursday as he outlined the draft budget that the government planned to make adjustments and cuts worth 54 billion euros ($62 billion) in the 2027 budget.

But with elections on the horizon, he left it to parliament to decide some of the more sensitive measures, such as a government proposal to reduce tax breaks for pensioners.

The French economy has been slowing since the third quarter of last year, hit by weak consumer spending and, more recently, the surge in energy prices from the US-Israeli war against Iran.

AFP

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