“Emmanuel Macron, little Napoleon becomes the patient (indebted) of Europe.” In a recent article published by the Italian Panorama site, France takes it by its range. As revenge, the Italian editorialist joked about the state of public finances in Paris who, a decade ago, gave lessons of a serious budget in Rome. “We were used to interpreting the ‘patients in Europe’, the symbol of our crisis was the smile of Angela Merkel and Nicolas Sarkozy when the obligations of the Italian state collapsed and that the propagation exploded,” writes Nino Sunseri.
In the United States, we see France sink while, at the same time, Italy takes out the head of the water. In an article entitled “Italy was once the bad student of Europe, today France takes over”, the site CNBC Tests little flattering comparisons for Paris with Rome.
Primary excess Italy
In fact, if the French public debt remains at a lower level than Italian (113% for the first, 135% for the second), it is misleading. Because Italy has been able to greatly reduce its public deficit in recent years (to 3.4% in 2024) when France has continued to digs its own (5.8% last year and probably still 5.6% this year), while the economy is not in recession as it had been the case after the 2008 crisis.
Worse for the pride of Paris, Italy has identified a primary surplus (positive balance between expenses and income outside the debt), which France has not been able to do for years.
In France, as in Italy, in addition, the average interest rate of public debt is higher than the GDP growth rate, which leads to an unfavorable snow ball effect for public debt. But unlike France, Italy with its main budget surplus can partially compensate for the unfavorable dynamics of debt. France must still borrow because it spends more than its recipes.
“Pitoyable Show”
Nomura analysts especially do not see any sign of progress. “The trajectory of the French deficit is fragile and the probable investment of the Bayrou Government illustrates the challenge that France faces to control their expenses,” they say in their note. Italy also had its desert crossing with chronic instability and political disorders, but since 2022, the third European economy has found stability with the choice of Giorgia Meloni. This political sequence is judged very hard by international observers.
The Minister of Economy, Éric Lombard, had suggested that France could be forced to resort to the IMF before returning to his statement. A really unlikely hypothesis. First, because if France were hypothetically forced to ask for help, first would with the European stability mechanism (month), the IMF equivalent for the euro zone.
Bear, because in both cases (IMF or month), the French government would be forced to undertake structural reforms, which currently cannot do so due to the fragmentation of its parliament. The president of the ECB, Christine Lagarde, has rejected the idea that France must, for the moment, request the help of the IMF (or the month).
“The result is that France, previously the heart of Europe, is today in the same role as Italy for years: unstable, indebted, besieged by the qualification agencies and with the markets ready to attack, write to the Italian journalist Panorama. Only this time, Rome looks like a spectator, with a touch of revenge. We, the Italians, were chronic patients, Paris is today the patient in intensive care. “
French debt always attractive
However, a barely reassuring revenge recognizes the editorialist.
The only sign of relief, in this political-financial fall in the country, the French debt is still acclaimed by investors. This Thursday morning, a loan from France in the markets attracted a strong demand for investors, a sign that the French debt continues to attract despite the political and budgetary crisis that increased bond rates at the beginning of the week. The State raised on Thursday 7.3 billion euros due to ten years on September 4, according to the figures published by the France Trésor (AFT) agency, while the demand for investors was twice higher, at 15.8 billion.
The increase in the fees of the French obligation (almost 3.5% this Thursday) makes the debt very attractive. Not having a very safe firm, France continues to properly pay its creditors.
Source: BFM TV
