France's Public Debt Surges to 3,303 Billion Euros
As of the end of September 2024, France's public debt has reached a staggering 3,303 billion euros, equivalent to 113.7% of the country's gross domestic product (GDP). This marks a significant increase from 112.2% at the end of June, according to the National Institute of Statistics and Economic Studies (INSEE). The debt rose by 71.7 billion euros during the third quarter, primarily driven by a substantial increase in state debt, which alone increased by 59.8 billion euros to 2,690.5 billion euros.
The debt levels have been on a steady rise since the early 2000s, having tripled from 1,082 billion euros in 2004. The surge can be attributed to various factors, including the economic fallout from the COVID-19 pandemic and ongoing political instability following President Emmanuel Macron's government dissolution in June. Moody's recently downgraded France's sovereign rating by one notch to Aa3, citing increased uncertainties surrounding the current administration.
Economic Implications and Future Projections
The rising debt burden has raised concerns about France's public finances, with the public deficit projected to reach 162.4 billion euros in 2024, or 6.2% of GDP. The new government, led by Prime Minister François Bayrou, faces the challenge of containing the deficit to an acceptable level of around 5% in 2025. According to INSEE forecasts, the debt-to-GDP ratio is expected to peak at 116.5% in 2027 before gradually declining to 115.8% by 2029.
France's economic situation is precarious, particularly as it is now the only major European country that has not reduced its debt since the pandemic. The Bank of France's governor, François Villeroy de Galhau, has warned that without significant fiscal reforms, France risks further downgrades from credit rating agencies, which could lead to increased borrowing costs and a heavier debt burden. The Agence France Trésor is projected to borrow a record 300 billion euros in 2025, underscoring the urgent need for fiscal management.
