Friday, December 2, 2016

What a debt, François Hollande, will he leave ? – Europe1


In announcing that it sought his not a new mandate, François Hollande at the same time presented a summary of his five years at the Elysée. “Since may 2012 (…) I acted with the governments of Jean-Marc Ayrault and Manuel Valls to straighten the France and make it more fair. Today, when I speak, the public accounts are remediated, the social Security is to balance and the debt of the country has been preserved”, has argued François Hollande on Thursday. But this statement resists the facts ?

A debt that continued to climb. Then one expects of a debt that it should be reduced, François Hollande has preferred the term “preserved” and this is probably not a coincidence : that we operate on the raw value or as a percentage of GDP, the public debt has not decreased during his term of office. On the contrary, it has continued its inexorable progression. Thus, while the public debt accounted for 89.5 per cent of GDP at end-2012, it should reach for 96.1% at the end of 2016, according to the official forecast. In value, the debt increased from 1.868 billion euros in 2012 to 2.098 billion in 2015.


The reasons are known : like all his predecessors, François Hollande, has adopted budgets in deficit. Each year, France spent more than it earned and therefore had to borrow the difference. The low growth and inflation near zero have not helped things, limiting the tax revenue expected by the government. François Hollande can nevertheless console themselves on one point : during his stay at the Elysee, the deficit has been reduced year after year.


Less well than the rest of Europe. If François Hollande has a share of responsibility in the evolution of the public accounts, he has also had to do with the international context. However, the latter was complicated in the beginning of the mandate, particularly in Europe. Our neighbours have therefore also gone through a difficult period for public finances : between 2012 and 2015, the debt is increased from 83.8% to 85% of GDP in the EU, and 89.5 to 90,4% in the euro area. But while the curves of debt at european level are inverted from 2014, that of France has scarcely declined. In summary, while the increase of the public debt is a constant in France for decades, it was only a episode temporary to the rest of Europe.


The comparison with the european States of comparable size, in contrast, is more neutral. The debt has risen from 12% in France between 2012 and 2015 : this is obviously less than that in Germany (-2%), Poland (+5%) or Italy (+9%). Instead, it is better than the skid of the public accounts in the United Kingdom (+17%) and Spain (+20%).

But better than its predecessor. François Hollande will be able to comfort himself by thinking that he has done better than his predecessor : whereas during his tenure the debt increased by 12%, it jumped to 49% under Nicolas Sarkozy, from 1,250 to 1.870 billion euros. This last has, however, a mitigating circumstance, France who at the time had to face the subprime mortgage crisis.


the Only consolation, this debt is less expensive. Assert that the debt of France has been "preserved" is therefore more than questionable. François Hollande can still claim a result : the cost of this debt, that is to say, interests that need to be paid at the same time as it repays the capital loan is declined. Thus, while the burden of the debt amounted to 46.3 billion euros in 2012, it should be around 44.5 billion in 2016 and move to 41.8 billion in 2017. But if this debt is less expensive, France is not for big-thing : this is mainly due to the euro zone crisis and the largesse of the banks european central that the interest rates on bonds have dropped. At the height of the Greek crisis, some investors paid even France to lend him money, that is to say, negative interest rates.


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