is France doing worse than Greece and Italy, as Bruno Retailleau asserts?

The Republicans are attacking France’s degraded budgetary situation. Tuesday April 9, during the “Night of the Economy” organized as part of the Estates General of the Right, party officials discussed the situation “catastrophic”, according to them, of the country’s finances. The next day, the executive announced for the year 2024 a public deficit greater than 5% of gross domestic product (GDP) – a figure higher than the 4.4% initially planned.

“The moment of truth has arrived: we are taking the same path as Greece”had warned the boss of the Republicans Eric Ciotti, in an interview with the newspaper The echoes published on March 20. “A thousand billion will be Emmanuel Macron’s bill in the space of two five years. In terms of debt, we are just doing worse than Greece and Italy (…) This means that the situation is catastrophic “, castigated the president of the LR group in the Senate, Bruno Retailleau. How is the French public debt really doing? Are we doing worse than Greece and Italy? Franceinfo delved into the figures.

France, third most indebted state in Europe

France is one of the most indebted countries in Europe. In the second quarter of 2017, when Emmanuel Macron came to power, the French public debt (i.e. all debts contracted by public administrations) was 2,231.7 billion euros , according to INSEE. At the end of 2023, it amounted to 3,101.2 billion euros, according to this same source. That is a differential of 870 billion euros, a figure a little lower than the “1,000 billion” advanced by Bruno Retailleau.

Contrary to what the senator asserts, France however remains less indebted than Greece or Italy, in relation to its GDP. In the third quarter of 2023, French public debt stood at 111.9% of GDP, compared to 165.5% for Greece and 140.6% for Italy, according to the latest figures from Eurostat (PDF), the statistical office of the European Union. In comparison, this rate stood at 89.9% for the eurozone and 82.6% for the EU as a whole.

Debt is, in any case, not the only relevant criterion for judging the financial health of a country. It all depends on the confidence creditors have in the borrowing country. “Those who lend money to France have no doubts. They lend at interest rates which are significantly lower than in Greece or Italy”observes with franceinfo Eric Heyer, director of the Analysis and forecasting department at the French Observatory of Economic Conditions (OFCE). “Interest rates are lower in Germany than in France, but this difference only increases very marginally”observes the doctor in economics.

A “well-rated” public debt

Also, France, Greece and Italy do not obtain the same rating from the main financial rating agencies, which assess the capacity of a borrower – a State, for example – to repay its debt. To do this, the agencies are interested in assets held by the State. “If you have three castles and two Ferraris, the bank will lend you money more easily. France is one of the countries with the most assets in Europe”illustrates Eric Heyer. “Not only do Italy and Greece have fewer assets, but they have weaker growth prospects compared to France”, underlines the economist. A criterion also taken into account by the rating agencies.

Agence France Trésor recalls that France obtained a rating of AA- from Fitch, Aa2 from Moody’s and AA from Standard and Poor’s in 2023. In other words, these three agencies consider that the value of French credit is of high quality and that the risk that she will not repay her credit is very low. “It’s the equivalent of an 18 out of 20. Greece is rated the equivalent of 9/20 and Italy, 11/20”illustrates Eric Heyer.

“When we calmly look at the figures, we see that the situation has deteriorated, but that it remains sustainable.”

Eric Heyer

economist at OFCE

At the global level, disparities between countries in terms of debt are significant. According to a ranking by the International Monetary Fund (IMF) published in 2023, Japan is the most indebted state in the world (261.29%), ahead of Greece, Venezuela, Italy, the United States, Portugal and Spain. France comes in 8th place (111.67%). However, a high debt rate is not necessarily a sign of an economy in crisis. “There is no level of public debt above which there is a catastrophe”assures Eric Heyer. “The Japanese have a debt greater than 260 points of GDP but they have a lot of assets on the other hand. Argentina, which has a debt of around 80 points of GDP, is bankrupt”notes the researcher.

A deficit widened by the various global crises

Covid, war in Ukraine, energy crisis – all these crises have contributed to widening public deficits around the world. France is no exception. For Eric Heyer, it is still appropriate to examine the nature of the slippage in our finances: “SIf debt is used to accumulate assets, such as investing in hospitals or the environment so that future generations can benefit, there is no problem. But recently, France has fallen into debt for a policy of “whatever it takes” and for an energy shield. “It’s not good debt from an accounting point of view,” judges the economist. “Now we must come up with a plan to repay this collective debt. A plan that involves everyone and that is staggered, so as not to disrupt growth.”