At the start, there is the verb. And then the numbers. “It’s reform or bankruptcy,” threatened Gabriel Attal, the Minister of Public Accounts, repeatedly during the parliamentary debate on the decline in the legal retirement age. On Thursday March 16, before a handful of wrung-out ministers, the Head of State justified the use of article 49.3 by the existence of “economic and financial risks” that were too great. Already in September 2007, François Fillon, then Prime Minister, declared that he was at the head of a “bankrupt state”. Between the two, nothing. Otherwise a river of deficits and the totemic “whatever it takes” invented at the time of Covid and continued after the outbreak of war in Ukraine. The result: public debt at Himalayan heights, the 3,000 billion euro mark to be crossed this year (111% of GDP).
Today, is the Greek peril lurking on the borders of France? In the short term, not really. Admittedly, the borrowing conditions of the French State have been tightened, and the difference between the rates of French and German ten-year bonds reached 0.54% against 0.44% in January. “But in 2011, at the height of the euro zone crisis, this difference reached 1.90%. We are therefore not in a phase of maximum stress, but not in complete tranquility either”, observes Alexandre Baradez, the manager market analyzes at IG.
In fact, the fire is smoldering, and warning signs are lighting up here and there. The most burning, that of the burden of the debt, namely the sum of the interests that France must reimburse each year to its creditors. In 2022, the bill increased by nearly 13 billion euros. This is more or less the amount of the pension deficit estimated before the reform in 2030… A drift which is primarily due to the inflationary slippage. “A little over 10% of government bonds issued are indexed to inflation. A French specificity. When prices ignite, so do our repayments,” explains economist Eric Dor. Tomorrow, the effect of the drift in interest rates will be added to this. When Elisabeth Borne knocked down the joker of 49.3 at the Palais-Bourbon, in the great hall of governors on the top floor of the European Central Bank tower in Frankfurt, Christine Lagarde, the President of the ECB, gave a new turn of the screw to monetary policy.
Infernal mechanics
A slow poison with cumulative effects. The mechanics are infernal: with each bond maturity that falls, the French Treasury is forced to take on new debt. In 2023, it should issue the equivalent of 270 billion euros in bonds. However, it will do so on much less advantageous borrowing terms than a year ago. Over the years, the average rate of the stock of debt climbs inexorably… and with it the bill to pay to creditors. According to the calculations of Stéphane Déo, the chief economist of the management company Ostrum, even if the cost of money remained stuck at the current level, the debt burden would increase by 20 to 25 billion euros. ‘by 2030. Enough to make this item the first line of public spending, ahead of education, the army or health…
In view of the sums at stake, the decline in the retirement age will hardly change the equation or the infernal trajectory. “It is above all a signal given to the Germans, the Dutch, the European Commission and the rating agencies of a paradigm shift in France, of a first attempt to control public spending”, assures François Ecalle, founder of the Fipeco site and former head of the report on the state of France at the Court of Auditors. An essential guarantee at a time when France and Germany are torn apart in Brussels over the redefinition of the famous Maastricht criteria, which are now completely obsolete. An essential guarantee, too, while the 27 Member States of the Union will be discussing bitterly the feasibility of borrowing together again to top up the future strategic sovereignty fund at the next European summit on March 23 and 24. The left can always accuse the Head of State of having bowed to the demands of the financial markets and our European neighbours. It’s true, in part. But to deny these requirements is to shut oneself up in a denial of reality.
