French public debt at record high

French debt in percentage of GDP value. [Insee]

French public debt decreased in 2013, but is still higher than expected. Total debt continues to climb and fails to meet the Maastricht criteria. EURACTIV France reports.

Despite austerity measures, France’s public deficit did not meet its government targets for 2013. The French National Institute of Statistics and Economic Studies (INSEE) published figures showing that it currently stands at 4.3% of GDP.

The French government expected this percentage to be 4.1%, whilst the European Commission predicted 4.2%. However timid, the reduction of public deficit from its previous level of 4.9%, in 2013, is still a significant improvement.

Struggling with revenue

On closer inspection, the statistics should worry the French government. Although expenses reached target reductions from 3% in 2012 to 2%¨in 2013, revenue is lower than expected. Revenue has decreased from 3.3% compared to 3.7% in 2012. The state has reduced its financial needs, but those of local administrations have increased.

According to a press release from the French Ministry of Budget, Public Accounts and Civil Administration, “measures to restore public accounts recorded a historical 2.5 percentage points of GDP, whereas unfavourable economic conditions adversely affected revenues by 1.5 percentage points. The implementation of expenditure, consistent with expectations, proves the government’s ability to meet spending targets set by the parliament”.

Almost €2000 billion of debt

France’s Ministry of Finance criticised the debt-to-GDP ratio, and called for a change in the calculation.

According to the INSEE, public debt was 93%, or €1925 billion, in 2013, a new record, and higher than the €1841 billion recorded in 2012. The French Ministry of Finance argues that this number should not include financial support provided to European states like Greece, Spain or Portugal. It should also exclude the contributions made to the European Stability Mechanism, the measure put in place to help ailing banks.

When excluding financial support to troubled countries, and the capitalisation of the European Stability Mechanism, the debt ratio is 90.4% of GDP. The Minister of Economy highlights that “it would then be in line with government forecasts,” and effectively blames the EU for another French mishandling of public accounts.

France is one of the countries of which the public debt exceeds economic convergence criteria set out by the Treaty of Maastricht, both in terms of annual deficit and total volume of debt. According to the treaty, public deficit should not exceed 3% of GDP, and public debt should be limited to 60% of GDP.

Macroeconomic and public finance predictions for 2014-2017 should be provided to the parliament within the stability programme in mid-April and to the Commission before 30 April.

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