Can A State Go Into Debt Without Limits?

That would be impossible: in France, the survival of the euro zone is at stake, as is the confidence that foreign investors have in us.

The French public debt has now reached 113.7% of GDP, but some say that the situation of our public finances is, in short, a completely secondary problem. In the third quarter of 2022, the debt still swelled by 40 billion euros, standing at 2,956.8 billion euros. A straw, therefore… Some, like Jean-Luc Mélenchon, do not see why we would bother with figures so high that they become abstract, or who could well force us to repay this colossal debt.

Distrust

This idea does not stand the test of reality. First, France chose the euro, and if our country decided unilaterally not to pay its debts, that would signify the death of the single currency. If some countries in the euro zone repaid their debt (randomly, Germany or the Netherlands) while others (still randomly, France or Italy) decided not to do so, it would be the end of the euro. If our European partners show great leniency with regard to our not insignificant budgetary “I don’t care”, this tolerance could soon no longer be appropriate.

Then, you should know that half of the French debt is held by foreign investors. If France proclaimed loud and clear its intention never to repay its debt, it would cause a wave of mistrust among American and Asian buyers, which would result in a surge in interest rates on our government bonds. It is therefore France’s ability to refinance itself that is at stake. This desire not to repay the debt has flourished in an environment of low interest rates. But, with the return of inflation, interest rates are rising dangerously… and so is the debt burden. After 34.7 billion euros in 2021, the debt burden exceeded 46 billion euros in 2022, more than the defense budget (41 billion).

This article is originally published on lepoint.fr