Debt reduction seems less of a priority than before

It is a word that we have not heard at all in this electoral campaign when the first of the presidential elections takes place in eight days. Five years ago, the questions of debt, public deficit and budgetary balance had however largely occupied the debates. Does this mean that the situation has improved in five years? Not at all. The budgetary floodgates have opened quite the contrary. With first of all the crisis of “yellow vests” in 2018. And then especially the covid two years later.

The debt has grown in five years. According to the latest figures published by INSEE at the start of the week, the debt reached more than 2,813 billion euros at the end of 2021, i.e. almost 113% of GDP, i.e. of the wealth created in one year in France. With a deficit of 6.5%, so far from the 3% targeted five years ago. An objective targeted by the European Stability Pact, but the Covid crisis requires, has been put on hold throughout the pandemic. The Covid has created an exceptional situation all over the world. The countries of the European Union, including France, have decided to let the debt grow in order to put in place a safety net that allows employees to keep their jobs and households their savings. Especially since the money was cheap. France even borrowed at negative rates for several years. But last week, France’s ten-year borrowing rate rose above 1%. A first for four years.

Normally France must send to Brussels by the end of the month its budgetary and financial objectives, that is to say its forecasts of deficit, debt, growth also for the months to come. This is called a budget trajectory. But Bercy decided to send it later. Because of the electoral deadline but also of the geopolitical context with major economic consequences, which panic all the indicators starting with inflation. Consumer prices have increased by 4.5% in one year in France according to the latest figures published by INSEE this week due to soaring energy prices. We hadn’t seen that for thirty years. What may still postpone the reduction of the debt.