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A report on French National Debt – “a very worrying situation”

Monday, 19 December 2005

A report on French National Debt - "a very worrying situation"

France is living beyond her means, a report prepared by former BNP Paribas chief executive Michel Pebereau, for the French Treasury, announced. The "financial situation today appears to be very worrying" and will spiral out of control unless a freeze is put on public spending over the next five years.

In 1980 the national debt was just 20% of the GDP but this year is set to reach 66% (€1.2 trillion), rising faster than any other country over the past decade.

The report attributes the problems to an ever-expanding civil service (14% rise between 1980 and 2003, with state responsibilities actually declining) and public pension liabilities. Finance Minister Thierry Breton warned the government recently that by 2010, France will have more pensions to pay than workers to fund them.

In an interview with French magazine ‘Le Point', Breton declared "It is possible to bring down the debt to less than 60% GDP with a combination of spending cuts and asset sales".

In an interview on France2 television, Prime Minister, Dominique de Villepin also confirmed that debt would be reduced to 60% GDP within five years and added that a conference will be held in January to attempt to resolve the problems.

France will now enter a fourth year of breaching the EU Stability and Growth Pact, which requires governments to keep debts below 60% of GDP and should perhaps take some advice from Canada, whose debt has been reduced from 60% to fewer than 40% over the past decade.

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