Highlights:
- France’s general government (GG) debt-to-GDP is expected to reach 112% in 2024, up from 95% in 2014.
- Post 2014, there has been divergence in the debt-to-GDP path between France and the other Euro Area counterparts and the divergence is expected to grow wider in the next 5 years. France’s GG debt-to GDP is expected to rise to 124% by 2028, 35 percentage points higher than the Euro Area average of 89%.
- France was placed under the Excessive Deficit Procedure (EDP) in September 2024, for consistently not adhering to budgeted fiscal deficits, raising credibility issues.
- France’s poor fiscal record can be attributed to a very high government spending ratio and lack of political consensus to conduct fiscal reforms.
- France’s public expenditure as a percentage of GDP is higher than other economies in the European region. This gap in spending can be attributed to high welfare spending- pensions, healthcare subsidies and unemployment benefits.
- According to the recent winter European Commission forecasts, France’s interest expenditure to revenue is expected to rise to 5% in 2026 from 3.3% in 2023, adding to the debt burden.
- The yield differential of France with Germany has gone higher than Portugal and converged to Spain over the past year indicating a gradual loss of investor confidence
- France’s remarkably high share of external debt of about 40% of total general government debt in 2023 could pose a risk amid rising uncertainties.
- Going ahead, the impending deleveraging process is expected to weigh on economic growth.
