Never seen. On the sidelines of the presentation of the 2024 finance bill, Agence France Trésor, in charge of placing French debt on the markets, announced that the State intended to borrow next year for a record amount of 285 billion euros. This is a clear progression compared to the already unprecedented debt program of 270 billion euros in 2023.
The information did not fail to provoke a reaction from defenders of budgetary rigor, at a time when the rise in interest rates is raising the debt burden to worrying levels: 52 billion euros expected in 2024 and more than 70 billion in 2027. make it the first item of state spending.
Just over half of the public debt is in the hands of foreign investors
Divided between the State (80% of the total), “various central administration bodies” (2.4%), “local public administrations” (8.1%) and “social security administrations” (9.5%) , French public debt crossed the symbolic milestone of €3 billion for the first time in early 2023, representing 112.5% of GDP.
If in some countries like Japan the public debt is mostly in the hands of resident investors, the same is not true in France. According to data from the Banque de France, more than half (51.4%) of negotiable debt securities issued by the State are in the hands of foreign lenders, more than two-thirds of them European. A proportion much lower than the levels reached in the early 2010s (up to 70%), but significantly higher than that of the early 2000s (28.7%).
However, it is impossible to know more about the status (pension funds, sovereign funds, banks) or geographical origin of foreign investors whose anonymity is protected by the Commercial Code.
Regarding public debt securities held by resident investors, they are distributed among insurance companies (12.2%), banks (7.1%), collective investment organizations in securities (1.6%) and the category of “other French investors” (27.8%). ), which includes the Banque de France, which alone holds about a quarter of French debt.
A worrying proportion of non-resident holders?
The holding structure of public debt may raise questions. Some will consider that, in the name of sovereignty, it is preferable for the debt to be mainly in the hands of resident investors. In fact, foreign creditors are less “captive”: they are the first to sell their securities in times of crisis, when residents are more willing to hold their obligations until they expire. Furthermore, if the State has coercive power over resident investors through its tax policy in particular, this is not the case for foreign lenders.
But borrowing from non-resident creditors doesn’t just have disadvantages. This geographical diversification of debt holdings demonstrates the attractiveness of bonds issued by the French State. Being able to turn to a large number of foreign investors will allow you to benefit from often more advantageous financing costs.
A model based on securities held almost exclusively by domestic investors also has its limits. Firstly, because the financing of public administrations by resident creditors can be detrimental to the financing of the private sector. Then, because it depends on the demographic evolution and behavior of the population. In fact, the aging of the population in developed economies could alter in the medium term the ability of the State to borrow from residents, knowing that households tend to dissave when they age, which limits the amounts available to invest in bonds.
Source: BFM TV
